Legendary investor becomes tech giant’s biggest shareholder.

 

US investment guru Warren Buffett (pictured) has purchased a significant stake in HP Inc, which has seen its share price jump 16 per cent in the wake of the transaction.

Buffett’s Berkshire Hathaway is now the largest institutional investor in HP, with a stake of more than 11 per cent, valued at around US$4 billion.

According to analysts, part of the appeal of HP 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 three per cent dividend.

Buffett likes companies that can comfortably fund big buybacks because the purchases increase Berkshire’s percentage ownership of them.

HP has a low valuation because investors view the PC business as cyclical and printers as “secularly challenged”. However, the printer business, which generates half of HP’s profits, has held its own in recent times.