Warren Buffett's Berkshire Hathaway buys 11.4% stake in HP
Even notoriously tech averse stock market gambler can't resist piece of pandemic-boosted PC extravaganza
Warren Buffett's Berkshire Hathaway has taken up a double-digit stake in PC and print biz HP Inc's stock worth about $4.2 billion, a move that sent the company's share price up by 10 percent.
The purchase, confirmed in a SEC filing by the investment vehicle on 6 April, saw roughly 121 million HP shares shift over to the new owner in what can be seen as a vote of confidence in the residual value of HP. This equates to a circa 11.4 percent ownership of the company.
"Berkshire Hathaway is one of the world's most respected investors and we welcome them as an investor in HP," the world's largest printer and second largest PC brand said.
HP joins investments in the Berkshire Hathaway portfolio including Apple – which constitutes around 47 percent of the portfolio – Bank of America, Coca-Cola, American Express, and Kraft Heinz.
The investor had amassed a stake in IBM, a process that started at the beginning of 2011, but by 2015 Berkshire Hathaway warned it would have taken a $2 billion bath if it had cashed in the stock at that point.
Buffett picked up Apple in 2016, began offloading IBM in 2017 and exited entirely in 2018.
The billionaire, notoriously averse to tech stocks in general, also ditched a $2.1 billion investment in Oracle in 2019 - just months after buying the shares. "I don't think, particularly after my experience with IBM, I don't think I understand exactly where the cloud is going," he said.
HP will not pose the same challenges for Buffett, whose personal wealth (at $117 billion as of last month) makes him one of the wealthiest people on the planet. HP isn't yet existentially challenged by the cloud, and is in the midst of a turnaround plan that is starting to yield some results.
It was the relative underperformance of HP on the stock market that was seized upon by Xerox and activist investor Carl Icahn to aggressively pursue HP investors, offering up to $36.5 billion to buy the business to create a commercial print, copier and PC giant. This sparked the turnaround strategy from HP CEO Enrique Lores.
The pandemic killed off Xerox's hostile takeover – that was the excuse Xerox used. HP since has worked on simplifying its operating model, cutting back on headcount, and has benefited in the past two-plus years from the work-from-home-revolution as governments imposed lockdowns on their citizens.
HP perhaps hasn't had the same buying power of the cloud giants, or even rival Dell, and so maybe missed out on chip allocation during the tight supply situation. Nevertheless, the PC has become the center of everyone's universe since March 2020. And HP's printing business has benefited too.
In the year ended 31 October 2021, HP reported revenue of $63.5 billion, up 12.1 percent, and net income was up to $6.5 billion from $2 billion in the prior year. A very different trajectory to the one IBM was on theregister.comwhen Buffett owned it. ®