Berkshire's HP investment is a bet by Buffett on hybrid work post-pandemic, Morgan Stanley says
Berkshire Hathaway's $4.2 billion investment in PC and printer maker HP could be a bet by Warren Buffett that the hybrid word model is here to stay in a post-pandemic world, according to Morgan Stanley. "We believe Buffett's investment is a long-term bet on HPQ becoming a winner in the hybrid work market, given the company's position as the leading global print vendor (by units and revenue), second largest PC vendor," Morgan Stanley analyst Erik Woodring said in a note Thursday. The analyst added that HP is a top three-vendor in enterprise headsets and video conferencing systems, assuming the recent acquisition of electronics company Plantronics is approved. The "Oracle of Omaha" bought about 121 million HP shares, a regulatory filing released late Wednesday showed. The news sent HP's stock surging nearly 15% to a record high Thursday. Still, Woodring is sticking with an underweight rating on HP because he continues to believe a PC down-cycle will lead to underperformance over the next 12 months. Other analysts said the investment is a classic value bet and that Buffett is attracted to the consistent capital returns generated by HP's aggressive buyback program and sizable dividends. HP generates significant free cash flow, which the company has invested in dividends and share repurchases, both of which Buffett favors, according to Edward Jones analyst James Shanahan. Since the end of the 2018 fiscal year, HP has utilized $7.6 billion to repurchase outstanding shares, which represents a significant percentage of the current market cap, Shanahan said.

Warren Buffett. Gerald Miller | CNBC