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Warren Buffett is at heart a value investor.
recent investment activity, including the purchase of more than $4 billion in HP stock, illustrates that.
Much has been made over the years about Buffett’s transformation away from a deep-value investor in the mold of his mentor Benjamin Graham to one who recognized the value of great franchises like
(ticker: KO), and would pay up for them. “It’s far better to buy a wonderful business at a fair price than a fair business at a wonderful price,” Buffett has said.
But when it comes to actual investing, Buffett generally likes to buy things inexpensively.
HP (HPQ) is a fair business trading at a cheap price. Berkshire Hathaway (BRK. A, BRK. B) paid about nine times earnings projected 2022 earnings per share for its 11% stake in the maker of personal computers, printers, and printing supplies.
News of Berkshire’s purchase, revealed late Wednesday, boosted HP’s stock by 15% Thursday to $40.08. HP shares fell 3.6% to $38.63 on Friday, while Berkshire’s Class A stock was 1.8% lower at $529,000.
What did Buffett see in HP?
Part of the appeal could be that the company generates ample free cash flow and returns all of it to shareholders through an aggressive stock buyback program, as well as a nearly 3% dividend. HP has bought back over 25% of its stock since October 2019, the end of its fiscal 2019. Buffett likes companies that can comfortably fund big buybacks because the purchases…