While most traders were settling down for the day, Warren Buffett made a surprise announcement that startled many traders. The oracle of Omaha’s company, Berkshire Hathaway, silently disclosed that it had purchased over 121 million shares of Hewlett Packard (NYSE: HPQ). Shares surged on the news, with this being the latest significant investment made by the conglomerate in recent months.
Berkshire now owns an 11.4% stake in the electronic part giant, worth around $4.2 billion in total. A representative for HP simply said that “Berkshire Hathaway is one of the world’s most respected investors and we welcome them as an investor in HP.” Berkshire Hathaway itself declined to comment on the purchase.
The HP purchase represents the third major investment Buffett had made since February 26th, when he wrote to shareholders that he felt that “internal opportunities deliver far better returns than acquisitions,” and that there was little excitement for him in the stock markets right now.
Shortly after making this comment, Buffett ended up buying an insurance company called Alleghany for $11.6 billion in cash, adding to its existing portfolio of insurance companies, including Geico. Also in the month of March, Berkshire bought a 14.6% stake in oil giant Occidental Petroleum (NYSE: OXY), a deal that was worth $6 billion.
Prior to all this, Berkshire had gone over six years without making a single major acquisition. At the time, the company had over $146.7 billion sitting in cash, a massive position that was making many shareholders nervous. Now that inflation has crept higher, Buffett has pledged to keep at least $30 billion in cash on hand.
It’s uncertain whether it was Buffett or Munger themselves behind this decision or whether one of its other portfolio managers, Todd Combs and Ted Weschler, was the brains behind the HP stake. Normally Buffett handles larger investments, as was the case with his Apple investment, but he has also expressed interest in delegating more responsibility to his top lieutenants as well now that he is getting older.
Shares of HP were up around 10% following the surprise announcement. Over the past year, HP’s stock has crept up around 8.2%, not that great compared to the S&P 500 and the Nasdaq. It’s this lack of results that have made HP a worrying prospect for some analysts.
Morgan Stanley recently downgraded HP from a neutral to a sell rating, warning that PC part sales are expected to fall in the coming months. Currently, only six analysts are bullish on HP, while eight are neutral, and another five are bearish. That’s despite the company’s recent strong Q1 results, which managed to beat revenue and earnings estimates. Management even said 2022’s figures would top analyst estimates as well.
HP Company Profile
HP Inc. is a leading provider of computers, printers, and printer supplies. The company’s three operating business segments are its personal systems, containing notebooks, desktops, and workstations; and its printing segment which contains supplies, consumer hardware, and commercial hardware; and corporate investments. In 2015, Hewlett-Packard was separated into HP Inc. and Hewlett Packard Enterprise and the Palo Alto, California-based company sells on a global scale. – Warrior Trading News
