If you've been interested in the stock market for a while, you may have started to dive down the rabbit hole of stock prices. What are they? Why do they matter? Do they matter at all? And what companies have the highest share prices? Does this translate to a higher market capitalization?
Looking across the landscape, there are some expensive stocks out there on the market. Many ingrained in US stocks may think of Alphabet Inc. (also known as the parent company of Google) at $2,255.34 per share pre-split, or Chipotle Mexican Grill at $1,488 per share, or even insurance giant Markel Corporation at $1,328. While those are some sky-high stock prices, they have nothing on the top two companies on our list today. Let's take a look at the two most expensive stocks in the world, and the businesses behind them:
Berkshire Hathaway "A" Shares (BRK.A) - $461,724
On the list of most expensive stocks, one man reigns supreme: Warren Buffett. The Oracle of Omaha's holding company, Berkshire Hathaway, claims the title of "most expensive stock in the United States Securities Market" by a considerable distance.
While some of you may own Berkshire Hathaway Inc. on the advice of investment advisors or your uncle that drank a little too much over Thanksgiving, you most likely own the "B" shares in your portfolio. BRK.B currently clocks in at around $304 at time of writing, a total steal. So what does the most expensive share of Berkshire Hathaway cost? Well, one share of BRK.A will set you back a cool $461,724 at time of writing.
But what caused the company's stock price to inflate like transitory travel prices? This is the genius of Buffett and his partner, Charlie Munger. In 1962, they essentially bought an old midwestern textile company that they intended to strip for parts. They used some of the sales to purchase GEICO before that annoying fucking gecko came into the picture.
The money they had suddenly unlocked by owning an insurance company (called "float"), allowed the duo to start purchasing shares of companies that had a competitive moat, or a competitive advantage. This led them down a road which would culminate in a significant investment in an Atlanta-based soda manufacturer called "Coca-Cola," which has gone down as one of the greatest investments of all time. This cash they've generated from Coca-Cola would later be funneled into various investments and business segments (including purchases of companies like Dairy Queen and Sea's Candies, Flightsafety International, Helzberg Diamonds, their expanded real estate business, etc), as well as getting into and out of popular investments (like Wells Fargo, Delta Airlines and Apple Inc).
Berkshire Hathaway has been such a popular investment with, well, pretty much everyone, that the high share price became cost prohibitive. Essentially, it boiled down to mutual funds or pension managers that could outright purchase Berkshire stock (because fractional shares weren't a thing yet) due to the high stock price. In order to make themselves more accessible to retail investors, in 1996 Berkshire made the decision to issue "Class B Shares," which is what's known today at BRK.B.
Lindt & Sprüngli AG (LDSVF) - $103,350 on a split-adjusted basis
The second most expensive stock on our list is...actually not very costly. Thanks to the magic of a stock split, the chocolate makers at Lindt & Sprüngli are no longer some of the costliest shares on the market. Prior to their 2020 split, these shares were well over $100,000 for the popular chocolatier. However, a heavy split, combined with a drop in overall market value, saw the maker of chocolate bars fall off the list of most expensive stocks. But does that really matter?
Why Share Prices Don't Really Matter When Buying
Rewind with me for a moment to the 1990's. When our parents were investing, they had to pick up their landline, call their broker and usually purchase shares in lots of 100 or more. To do this, they had to pay a fee to their broker, as well as another fee to actually purchase the shares, and they had to have a large chunk of cash to be able to actually buy the shares they wanted to purchase in the first place. In that instance, the share price of the company they wanted to purchase mattered a great deal. They usually couldn't just buy a single share, so they had to take advantage of investing in companies that had lower share prices if they didn't have much money. Today, however, is a whole different ball game.
Now, it doesn't matter if we're purchasing expensive shares or not. Thanks to the advent of technology in our stock trades, share price only really matters for overall net gain or loss of an investment, rather than being a big factor in the purchasing decision of a company. Here's why:
We no longer have to purchase shares via a broker, and can do it directly in platform like Robinhood or Charles Schwab. This has led to...
No commissions! The commission-less fee structure now means it doesn't matter if we purchase one share or 100 shares: the fee is the same at $0.
The rise of fractional shares now mean that we don't even have to purchase a whole share of a company if we don't want to. You can purchase $20 of BRK.A if you'd like, and you'd own a fraction of that company that would move the same way up or down that any other investors' holdings would.
Now, is this to say that the share price is completely irrelevant? No, of course not. Share price factors into things like your total gain in the market (assuming there are no splits). The current share price multiplied by the total number of shares outstanding also equals the market capitalisation of the company, which is important in figuring out how big a company is and how much it could potentially be worth in the future to determine if it's actually a good investment.
Conclusion
When assessing companies to invest in, the actual price of a stock used to be a heavily considered factor for past generations. Now, however, thanks to the rise of technology and new financial tools, our generation is able to disregard high stock prices in our overall assessment of an investment. We can now spend more time looking into actual measurements, like revenue and costs, when making investment decisions.
