Warren Buffett's Berkshire Hathaway slashes stake in HP
Berkshire Hathaway (BRK-A, BRK-B) has slashed its stake in HP (HPQ). The move comes as demand for personal computers has declined. Bank of America Senior Equity Research Analyst Wamsi Mohan joins Yahoo Finance Live to weigh in on the challenges the PC maker has faced post-pandemic.
Mohan notes that while HP had a strong period during the pandemic, post-pandemic “all this pull-forward that happened for PCs is now acting against them.” Taking a look at competition, Mohan predicts “the performance delta is going to be closing between Dell (DELL) and HP.”
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Video Transcript
JARED BLIKRE: Warren Buffett slashing his initial stake in HP by nearly half. Just last year, Berkshire was the largest shareholder in the computer company. It's been a tough year for HP as demand for personal computers has significantly declined post pandemic.
So with Buffett looking to sell more shares of HP, what does this mean for the PC maker? Joining us now is Wamsi Mohan, Bank of America senior equity research analyst. And thank you for joining us here today.
WAMSI MOHAN: Thanks for having me.
JARED BLIKRE: I think I'd like to begin with the chart. If we could go to the Wi-Fi interactive, I have a chart of HPQ versus Dell, two competitors, different execution strategies. You can see HP here actually, kind of, languishing a little bit and we've seen Dell take off. What do you think accounts for some of HP's troubles this year?
WAMSI MOHAN: Yeah, absolutely. Thanks for having me. Look, I think HP has had a very strong period of performance and outperformance during the pandemic. Post pandemic all this pull forward that happened for PCs is now acting against them.
And so you've seen a couple of years where PCs declined significantly and that essentially led them to take down their cash flow outlook. And this is a company where cash flows are the most key metric to watch out for. And as those cash flows have compressed, that has really compressed and created the underperformance in the stock. So we were an underperform rated on this stock earlier in the year.
A couple of months ago, we thought that the PC cycle was approaching the turning point, which basically creates an inflection for positive performance. So we upgraded the stock to an overweight or a buy in in our lingo. And so as we look from here, we think that the performance delta is going to be closing between Dell and HP. Now, that said, I think Dell also had some very interesting things happen, including their portfolio, which is also exposed to servers and AI servers within that. So you've had a couple of catalysts here for each company that have created this performance divergence, but we think that they're going to more closely converge as we look out the next couple of years.
