HP soars to a record after Buffett’s Berkshire reveals US$4.2 billion stake

HP’s stock soared to a record high on Thursday (Apr 7) after Warren Buffett’s Berkshire Hathaway revealed it had taken an 11.4 per cent stake valued at about US$4.2 billion in the maker of personal computers and printers.

Berkshire said on Wednesday night it owned nearly 121 million HP shares, including 11.1 million purchased this week.

Shares of HP were up US$5.28, or 15.1 per cent, at US$40.19 in early trading on Thursday, after earlier reaching a record US$40.50.

Separated in 2015 from the former Hewlett-Packard, HP is a traditional technology stock that has benefited from increased demand as people spend more time working and being schooled at home.

The Palo Alto, California-based company agreed last month to buy audio and video accessories maker Poly, once known as Plantronics, for US$1.7 billion.

Buffett has until recently struggled to deploy more of the US$146.7 billion cash pile his Omaha, Nebraska-based conglomerate had accumulated, citing high market valuations and competition from private equity and other investors.

But in the last month, Berkshire said it has committed approximately US$22 billion to major new investments.

These include a 14.6 per cent stake in Occidental Petroleum Corp and an US$11.6 billion purchase of insurer Alleghany, Berkshire’s largest acquisition since 2016.

Buffett’s company also owns dozens of businesses including Geico auto insurance and the BNSF railroad, and ended 2021 with a US$161.2 billion stake in iPhone maker Apple Inc.

“Berkshire Hathaway is one of the world’s most respected investors and we welcome them as an investor,” HP said in a statement.

Morningstar analyst Mark Cash said HP might appeal to Berkshire because HP is aggressively returning capital to shareholders through stock buybacks and higher dividends.

“HP operates in markets that are challenging to (durably) grow at heightened rates, so focusing on margins and returns are the best way to reward shareholders,” Cash said. “Within tech, HP can be considered a value play.”

Berkshire repurchased US$27 billion of its own stock in 2021. CNA