Warren Buffett’s Berkshire Hathaway disclosed late on Wednesday that it had purchased a stake in computer and printer maker HP Inc worth $4.2bn, the latest sign that the sprawling conglomerate and its billionaire investor are finding value in the US stock market.
The purchase of 121mn HP shares was the third multibillion-dollar investment by Berkshire in roughly a month, following its $11.6bn takeovers of insurer Alleghany and acquisition of Occidental Petroleum stock worth more than $7.5bn.
The addition of HP stock to Berkshire’s portfolio signals that Buffett is still betting on corporate America and the US economy, even as Russia’s invasion of Ukraine raises the possibility of slower global growth and high inflation.
It is a noticeable shift by a company that had largely sat out a spate of big dealmaking over the past six years as stock valuations soared.
As recently as February, Buffett had complained about the lack of attractive investments, writing to shareholders in his annual letter that he and his right-hand man Charlie Munger were finding “little that excites us.”
Instead, Buffett, 91, directed Berkshire to pump much cash that the company’s various businesses — spanning the Geico insurer, BNSF railroad, and Dairy Queen ice cream chain — were generating in 2020, 2021 into buybacks of the conglomerate’s shares.
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Berkshire’s renewed dealmaking appetite follows a volatile stretch in markets, with shares of a broad swath of the public equity market down dramatically from record highs hit over the past year.
While the overall Russell 3000 — a stock index that includes small and large companies in the US — is down roughly 8 per cent from its 52-week high, the average stock in the benchmark is down more than 30 per cent.
That has opened the door to stock pickers such as Buffett. The purchase of HP shares will help put a small dent in Berkshire’s war chest, which stood at $146.7bn at the end of 2021.
HP shares surged 10 per cent in after-hours trading on the investment, which made Berkshire the company’s largest shareholder, according to data from Refinitiv and Bloomberg.
The disclosure on Wednesday with the Securities and Exchange Commission did not show whether Buffett made the investment in HP himself or if it was executed by one of the two portfolio managers on his team.
The two men, Todd Combs and Ted Weschler, oversaw just under a tenth of the company’s $351bn stock portfolio at the end of 2021. Buffett has traditionally been the one to pull the trigger on more significant transactions. Source: Financial Times.