HP (NYSE:HPQ) stock is up more than 15% today after Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) disclosed it has taken an 11.4% stake in the personal computer company.
A regulatory filing with the U.S. Securities and Exchange Commission (SEC) shows that Berkshire Hathaway owns 121 million shares of HP. As of yesterday, those shares are worth $4.2 billion.
Palo Alto, California-based HP’s stock had declined 8% this year prior to today’s move higher.
What Happened With HPQ Stock
The purchase of HP stock is the latest in a series of large investments made by Berkshire Hathaway. In late March, Berkshire Hathaway announced that it is buying insurance company Alleghany (NYSE:Y) for $11.6 billion in cash. The Alleghany acquisition adds to Berkshire’s portfolio of insurance companies, which also includes Geico.
Berkshire has also taken a 14.6% stake in Occidental Petroleum (NYSE:OXY) as global oil prices shoot higher following Russia’s invasion of Ukraine. Berkshire Hathaway spent more than $7 billion to acquire shares of OXY stock over a period of several days in late February and early March.
Prior to the Alleghany deal, Warren Buffett had gone more than five years without a major acquisition, leaving Berkshire Hathaway with $146.7 billion in cash on hand. While Buffett has said he will keep at least $30 billion of cash at Berkshire Hathaway, shareholders and analysts had questioned the large stockpile. Now it seems the Oracle of Omaha is putting the money to work in the market.
Why It Matters
Warren Buffett and his long-time business partner Charlie Munger have long complained that the stock market is overvalued. As recently as February of this year, Buffett said in his annual letter to shareholders that he sees little that “excites us” in equity markets. Instead, Buffett said in the shareholder letter that “internal opportunities deliver far better returns than acquisitions.”
As a result, Berkshire Hathaway has concentrated mostly on buying back its own stock in recent years. The company bought back $27.1 billion of stock in 2021, the highest annual level since Warren Buffett began repurchasing shares in 2018. That Berkshire Hathaway is now acquiring stock in companies such as HP and buying insurers such as Alleghany indicates that Buffett now sees some bargains in the market.
Berkshire Hathaway’s Class B stock is up 15% year to date at $344.71 per share while the benchmark S&P 500 is down 7% on the year amid ongoing market volatility.
What’s Next for HP
HP stock moves a leg higher today on news of the Berkshire Hathaway stake, which is seen as a vote of confidence in the legacy tech firm. As Buffett apparently finds value in HPQ, it seems other investors will as well.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.