Buffett trims HP holding
But still owns 11.7% of the stock
Warren Buffett and Berkshire Hathaway have trimmed their stake in HP (ticker: HPQ). But, they have retained the lions share of their holding and still own 11.7% of the stock. Find out why.
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The sales
Berkshire sold 5.5 million shares for $158.5 million. Berkshire held many of these shares indirectly via subsidiaries. They sold them over three days, with average prices ranging from $28.395 to $29.5925 for a total average price of $28.81.
Berkshire originally acquired the shares in 2022, where it became the largest shareholder. Berkshire then owned 11.5% of the shares. This has fluctuated slightly over time, and increased to 12.28% of shares outstanding. However, with the sales, Berkshire now holds 111.5 million shares (or 11.7% of the shares outstanding).
Berkshire would have recorded a loss on the sale. Berkshire’s acquisitions occurred at a price of around $35 per share. However, the sales are at around $28.81, thereby representing a realized loss. Berkshire’s remaining stake is worth around $3.2 billion, which is a paper loss on the remaining shares.
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Why sell?
Berkshire Hathaway and Warren Buffett did not state why they sold the shares. However, we can make inferences. These might simply reflect rebalancing owing to HP’s diminishing growth prospects. HP’s earnings recently disappointed. While many analyst price targets suggest that HP’s stock price could continue to increase, some of those targets are stale and few analysts have a buy recommendation. This is evident from the analyst recommendations in Factset.
This is most evident from Simply Wall Street. Simply Wall Street indicates that analysts have revised down their price targets. The decline is substantial. Predicted upside appears limited, according to analysts.
Similarly, analysts predict relatively limited earnings growth. This suggests that HP’s prospects might have worsened.
Why retain some shares?
Why did Berkshire Hathaway retain any shares? Berkshire Hathaway still retains around 11.7% of the shares outstanding. This suggests some confidence in HP. This might reflect HP being a behemoth and relatively “safe” in an economic downturn. It could also reflect a reasonable dividend yield of above 3%, which Berkshire Hathaway has viewed favorably. Further, Berkshire would focus prospectively: after the price has fallen, they are more interested in whether it will continue to fall. Analysts still give some upside, albeit reduced upside.
What do analysts like right now?
