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HP Inc Stock Gapped By 18.6% on Buffett’s Stake. Should You Buy It?

Simon Mugo trader
Updated 7 Apr 2022

Trade HP stock Your capital is at risk

Key points:

  • HP stock gapped up 18.6% after Warren Buffett revealed his stake in the firm.
  • The Oracle of Omaha is rarely wrong; there are legitimate reasons to buy HP.
  • I would buy HP stock on a pullback; here are my reasons apart from Buffett.
The HP Inc (NYSE: HPQ) stock price gapped up 18.6% after Warren Buffett revealed that Berkshire Hathaway had acquired 121 million shares worth $4.2 billion based on Wednesday’s closing price, equivalent to an 11% stake.

Also read: Best Cheap Tech Stocks Under $10.

Investors cheered the move, which was a significant boost to HP. The company has been lagging behind its tech industry competitors, which have seen their valuations soar since 2009, while HP had recorded a mere 50% gain since 2009.

Despite many critics writing off HP after splitting its enterprise software and hardware division from its personal computers and printers business in 2015, many predicted its demise as the computing market shifted.

However, the company has stuck it out and still controls a healthy share of the global laptop and desktop computer markets and the printers business. In addition, the firm recently announced the acquisition of Poly, a provider of video conferencing hardware, to facilitate its transition into a leading player in the hybrid work segment.

HP intends to incorporate Poly’s video conferencing capabilities to create products that can serve the large proportion of people working in hybrid work conditions, a rapidly growing market as the world adjusts to a post-COVID-19 environment.

It seems Warren Buffett has been keeping a close eye on HP, leading to the quiet accumulation of his current stake in the company, which acts as a vote of confidence in HP’s management and the company’s future.

HP becomes one of the few tech companies ever bought by the legendary investor who initially steered clear of tech companies saying that he did not understand the fast-changing tech environment and would instead invest in traditional business.

Buffett, who was relatively quiet after the pandemic struck, has been busy lately allocating some of his massive cash holdings to acquiring new investments, such as the $11.6 billion acquisition of insurance firm Alleghany announced last month.

The HP stake is another bold move by Buffett, who recently acquired a significant stake in Occidental Petroleum amid rising crude oil prices. Given the long term nature of many of Warren Buffett’s investments, we can assume that he intends to hold HP shares for a few years at the very least.

Investors who have been following Buffett’s investments know that he does his research before investing in any company. For this reason, I would go ahead and buy HP shares. However, I would wait for a pullback before jumping in.

*This is not investment advice. Always do your due diligence before making investment decisions.

Hp stock price.

HP stock price 07-04-2022
Source: Tradingview

Hp stock surged 18.62% to trade at $41.40, rising from Wednesday’s closing price of $34.90.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading