Warren Buffett’s Big HPQ $4.2 Billion Stake

            Warren Buffett is pilling up billions in HP

The Hewlett-Packard Company, abbreviated HP, was an American global information technology corporation headquartered in Palo Alto, California. HP created and sold a wide range of hardware, software, and related services to consumers, small and medium-sized businesses (SMBs), and major corporations, including customers in the government, health, and education sectors. Bill Hewlett and David Packard launched the company in a one-car garage in Palo Alto in 1939, producing electronic test and measurement equipment at first. The HP Garage at 367 Addison Avenue has been listed as a California Historical Landmark, and a plaque proclaims it to be the "Birthplace of "Silicon Valley."

From 2007 to the second quarter of 2013, HP was the world's leading PC manufacturer, then Lenovo overtook HP. HP specialized in the design and manufacture of computing, data storage, and networking hardware, as well as software development and service delivery. Personal computers, enterprise, and industry-standard servers, related storage devices, networking goods, software, and a variety of printers and other imaging products were among the company's major product lines. Households, small to medium-sized organizations and corporations, as well as internet distribution; consumer-electronics and office-supply stores; software partners; and big technology vendors were all served directly by the company. It also provided services and consultancy for its own products and those of its partners.

HP Inc reported net earnings of 6.5 billion dollars in the fiscal year 2021, up from 2.8 billion dollars in the fiscal year 2020. In 2012, HP Firm's net earnings plunged to a negative $12.6 billion US dollar loss as the corporation embarked on a major reorganization that included the division of the company into HP Inc and HP Enterprise Company.

Berkshire Hathaway

Berkshire Hathaway Inc., headquartered in Omaha, Nebraska, is an American global conglomerate holding company. GEICO, Duracell, Dairy Queen, BNSF, Lubrizol, Fruit of the Loom, Helzberg Diamonds, Long & Foster, FlightSafety International, Shaw Industries, Pampered Chef, Forest River, and NetJets are all wholly owned by the company, along with a 38.6% stake in Pilot Flying J; and significant minority stakes in public companies Kraft Heinz Company (26.7%), American Express (18.8%), The Coca-Cola Company (9.32 percent).

In the aftermath of the COVID-19 pandemic, the business purchased huge stakes in the main US aircraft carriers, including United Airlines, Delta Air Lines, Southwest Airlines, and American Airlines, beginning in 2016. However, the company sold all of its airline interests early in 2020. Since 1965, Berkshire Hathaway has averaged a 19.0 percent yearly increase in book value for its shareholders (compared to 9.7 percent for the S&P 500 with dividends included for the same period), while using enormous amounts of capital and little debt.

Warren Buffett, the company's chairman and chief executive, and Charlie Munger, the company's vice chairman, are noted for their control and leadership. Buffett focused on long-term investments in publicly traded companies early in his tenure at Berkshire Hathaway, but he has recently purchased more full companies. Berkshire Hathaway presently owns a wide range of companies, including confectionery, retail, railroads, home furnishings, encyclopedias, vacuum cleaner manufacturers, jewelry sales, uniform manufacturing and distribution, and several regional electric and gas utilities.

Warren Buffett and HPQ Stock

The stock of HP Inc (HPQ.N) rocketed to a new high on Thursday after Warren Buffett's Berkshire Hathaway Inc said that it had purchased an 11.4 percent stake in the maker of personal computers and printers for $4.2 billion.

Berkshire disclosed its ownership of roughly 121 million HP shares in a regulatory filing on Wednesday night, including 11.1 million purchased this week. HP shares closed at $40.06, up to $5.15, or 14.8 percent, after reaching $41.46 earlier.

Today, HP is in the spotlight because Warren Buffett's Berkshire Hathaway revealed a large interest in the company. Berkshire Hathaway reported owning 120.95 million shares of HPQ stock this week. The fund made its most recent buy this week, purchasing 4.3 million shares at prices ranging from $34.88 to $35.54. Berkshire now has a $4.2 billion stake in the company, based on Wednesday's closing price. As a result, the stock of HPQ is up over 15% this morning.

Berkshire Hathaway now has an 11.4 percent stake in HP, thereby making it an insider. A 10% interest in a company is required to be considered an insider. Furthermore, Berkshire Hathaway has become the company's largest stakeholder.

Furthermore, it appears that Buffett intends to own HP for a long time. Because Berkshire Hathaway has an average holding time of 28.93 quarters or just over 7 years, this is the case. If the fund decides to buy more HP stock, it must file a Form 4 within two business days to declare the transaction. Investors should also be aware that the shares were purchased through Berkshire Hathaway Specialty Insurance Company and GEICO Advantage Insurance Company, two of Berkshire's subsidiaries.

Berkshire Hathaway's stock prices regularly climb when the company announces new investments, which is seen as a seal of approval from Buffett.

Despite owning a $161.2 billion holding in Apple Inc. By the end of 2021, Berkshire Hathaway does not invest in technology businesses on a regular basis (AAPL.O). Buffett sees Apple as a consumer-oriented corporation that he can understand. In a statement, HP added, "Berkshire Hathaway is one of the world's most regarded companies, and we welcome them as an investor."

HP, which split from Hewlett-Packard in 2015, is benefiting from growing demand as individuals spend more time working and learning at home.

This year, the Oracle of Omaha has been on a shopping binge. Buffett recently bought a big stake in Occidental Petroleum and also paid $11.6 billion for Alleghany.

HP announced the acquisition of Poly last month, a video and audio equipment manufacturer, for $1.7 billion in cash, with a total transaction value of $3.3 billion, including debt. The transaction is expected to be completed by the end of 2022.

HP's entrance into the world of hybrid work will be accelerated by this acquisition, which comes eight months after the company purchased remote desktop software provider Teradici.

So, who else is placing a large bet on HP?

It's important to keep track of institutional ownership since huge funds provide liquidity and support for companies. In the fourth quarter, 1,073 funds reported owning HPQ stock, up from 136 funds in the previous quarter. During the quarter, 329 funds added to their existing positions, while 343 funds dropped their current positions. Meanwhile, the put/call ratio is 2.85, indicating that by a large margin, more funds own put options against the company than call options. This is a bearish indicator, particularly when the put/call ratio climbed in Q4. Buffett, on the other hand, appears to be anything but bearish.

Let's take a look at HP's largest stockholders with that in mind:

-         Berkshire Hathaway: 120.9 million shares or 11.48% ownership.

-         Vanguard Group: 111.5 million shares or 10.58% ownership.

-         BlackRock (NYSE:BLK): 107.9 million shares or 10.24% ownership.

-         Dodge & Cox: 104.1 million shares or 9.88% ownership.

-         State Street: 56.8 million shares or 5.40% ownership.

-         Primecap Management: 25.4 million shares or 2.41% ownership.

HP may appeal to Berkshire since it is aggressively returning capital to shareholders through stock buybacks and greater dividends, according to Morningstar analyst Mark Cash.

"HP operates in markets where it's difficult to (durably) grow at high rates, therefore the best way to reward shareholders is to focus on margins and returns," Cash added. "HP can be considered a value play in the tech world." In 2021, Berkshire Hathaway repurchased $27 billion of its own stock.