HP Inc. (NYSE:HPQ) closed 14.75% higher on Thursday after SEC filings revealed that Warren Buffett’s Berkshire Hathaway had acquired 121 million shares of the company. The investment is seen as a strong vote of confidence in HP Inc. The question of interest in this article is whether investors should continue buying the stock now that the price is different from what it was at the time of the recorded transaction.
HP Inc. is a highly attractive value stock. Zacks research ranks the company perfectly on value, growth, and momentum. At a price of $40, the forward PE is 8.19 while PEG ratio is 2.05. Tech stocks usually have higher PEG ratios close to 4, while PE ratios are normally close to 20. Consequently, HP Inc. appears undervalued in the market.
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Apart from valuation, there is another reason why an investment in HP Inc. matters now more than it did two years ago. Before the pandemic, the belief was that each household needed just one PC. Then working from home came, and the realisation came that every adult would need a PC. Businesses had to accelerate purchases of PCs to enable the employees to work from home. These changes account for structural changes in the industry. What is expected, therefore, is growth rates higher than the 4% that had been anticipated earlier.
HP Inc. to find a new high after Buffett’s 11% purchase
We think that HP has room to grow. The RSI is likely to move towards $70. The share price would stabilize around a new high of $45 before growing further as performance news came out. Traders should be guided by the RSI in making investment decisions. For long-term value investors, holding the stock is recommended.
Summary
Berkshire Hathaway purchased 121 million shares in HP Inc. The move signals a lot of confidence in the company as a value stock. Investors should buy and hold.
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