Buffett's enthusiasm for investment is being ignited.

After buying oil stocks and buying insurance companies, Buffett stepped in again to increase his position in Hewlett-Packard, a technology company.

Berkshire bought 11.1336 million HP shares for $399 million (2.534 billion yuan) between April 4 and April 6 at prices ranging from $34.88 to $36.43, according to Berkshire Hathaway's latest filings with the Securities and Exchange Commission.

Affected by the news, Hewlett-Packard shares were more than $4 higher on April 7 than the previous trading day, closing up 14.75% at $40.06.

In recent years, Berkshire has begun to invest more and more in technology stocks.

When it comes to the story of Buffett and technology stocks, the first thing that comes to mind is Buffett's early rejection of technology stocks, especially the experience of "halberd" IBM.

Buffett, who bought Apple Inc in 2016 and called Apple Inc the Berkshire "Big four" in a letter to shareholders this year, is obviously much more adept at investing in technology stocks.

What Buffett has always stressed is:"I will not invest in businesses that contain technological factors that I cannot understand, especially those factors that have a significant impact on the business. "

Obviously, not all technology companies are like this.

For Apple Inc, Buffett has always stressed that this is a consumer goods company, more like Xi Shi candy.

Buffett has said countless times that investing in technology is not what he is good at.

So Berkshire's actions in technology in recent years, including the Hewlett-Packard investment, seem to be more of a potential successor.

1. Berkshire has long been involved in the wave of technology stocks

The impression of Berkshire's investment in technology stocks is that Berkshire began to buy IBM in 2011. While Buffett was out of stock in 2018, he also pulled out of another technology company, Oracle Corp, which he bought in the third quarter of 2018 before the end of the year.

In fact, in addition to buying Apple Inc in 2016, Berkshire also has "pilot" technology stocks in 2018.

Berkshire has invested more than $600m in two large technology finance companies, StoneCo, the Brazilian digital payments company, and One97Communications, the parent company of the Indian version of Alipay Paytm.

StoneCo was the top four digital payment company in Brazil at the time, while One97 owned Paytm, India's most popular payment app. BABA and Softbank Corp. Group were also one of the investors in the company.

The two investments were not made by Buffett, but led by Berkshire Hathaway investment managers ToddCombs and Ted Weschler.

The two men have long been seen as potential successors to Buffett. Among them, Combs has rich experience in the field of banking and payment.

Buffett never comments too much on the two men's investment behavior, and they have complete autonomy.

Buffett is known to hate any company he doesn't know, so he usually prefers companies that generate a lot of cash flow and are hard to replace. this investment philosophy has also led Berkshire Hathaway to invest heavily in American "blue chip" companies in the industry.

Berkshire's increasing moves in technology companies in recent years suggest that a new generation of managers may adjust Buffett's investment strategy and try to invest in a wider range of industries.

It also shows that Berkshire is changing direction from Buffett's traditional investment area.

Berkshire also bought Amazon.Com Inc for the first time in the first quarter of 2019, not by Buffett, although he has been full of praise for Bezos.

Including in Buffett's latest interview, he clarified once again that it was not his idea to buy Activision Blizzard before the end of last year, but the behavior of his colleagues: "they have 30 billion dollars and have the right to invest independently." if they decide to invest in this country something I've never heard of, they don't have to ask me. "

Faced with huge cash flow, Combs and Weschler also face the same dilemma as Buffett, that is, "how to find a place where more cash can be stored."

It also means that they must broaden the industry and find some giant financial technology stocks worth investing in to improve their portfolios.

2、Buffett's attitude towards technology stocks: not knowing high technology will not frustrate me at all. High-tech enterprises can really build a moat, and the value is inestimable.

In the early days, Buffett did not touch any technology stocks.

Once, when he reflected on his mistakes, he specifically stressed that the mistakes he publicly admitted, it doesn't mean missing out on some revolutionary new inventions (like full video printing technology), high-tech (like Apple Inc computers) or better channel retailers (like prestige department stores).

In Buffett's view, he will never have the ability to identify these excellent companies at an early stage.

As we all know, Buffett is a person who emphasizes the circle of ability very much, so he says:

"I must stress that not knowing high technology will not frustrate me at all. after all, there are many industries in this world that Charlie and I think do not have any special experience, for example, we know nothing about patent assessment, factory processes and regional development prospects, so we never want to comment on these areas. "

"if we have any ability, it is that we know very well to do things as well as possible limits within the scope of competitive advantage. "

Buffett's attitude towards investing in technology stocks has not changed.

However, after entering the 21st century, technology companies have played a key role in the global market and began to attract more and more attention from investors.

At the 2019 shareholders' meeting, Buffett was asked whether Berkshire should expand its investment to include leading large platform technology companies as the world's most powerful companies seem to be technology companies.

Buffett said: "indeed, in high-tech enterprises, can really build a moat, that value is inestimable." "

But he also said: "I always lack confidence in myself. I don't think I can make the most accurate judgment in terms of high technology." I can see which company wins at a certain stage, and I can see how the business of each company is done. But in this field, there are too many people who are better than me.We don't do what we don't understand.」

Buffett stressed that his basic principle has not changed, that is, to act within his ability.

But in Berkshire, where the two successors are increasingly playing a role, investment in technology stocks is playing an increasingly important role.

It is clear that these two successors are not without corresponding capabilities in the field of technology stocks.

That may be why we have seen Berkshire get more involved in technology stocks in recent years.

3、Apple Inc is more like Xi Shi candy.

Buffett stressed:"I will not invest in businesses that contain technological factors that I cannot understand, especially those factors that have a significant impact on the business. "

Buffett will do the same for companies that can understand and value, whether it's high-tech or not.

For example, the investment of Apple Inc, which we are familiar with, has brought a lot of returns to Buffett.

In May 2016, Berkshire Hathaway built its first position in Apple Inc, buying 10 million shares, and Buffett increased his holdings several times in the years since.

In the end, Apple Inc became Berkshire's number one position.

Buffett stressed countless times in public that Apple Inc is more of a consumer goods company, which is more like Xi Shi candy.

In Buffett's view, this is a big difference between companies like Apple Inc and IBM.

He believes that Apple Inc is a company that uses technology to produce consumer goods. It is a very useful product for people. As the number of participants increases, it becomes more and more useful.

"if you look back at your old mobile phone, it's an incredible and useful product-it changed the lives of my mother and my father, and it changes people's lives every day. It took them a long time to become everywhere. Smartphones are now a part of the lives of thousands of people, in all aspects of life. They have a variety of uses. It is a kind of consumer goods. "

And time now gives the answer, and Buffett's judgment is correct.

"all kinds of things will happen to Apple Inc in the next ten years. The point is, you need to know how popular Apple Inc's products will be five to ten years from now. I don't think Apple Inc is a stock. I think this is our third largest business. "

Buffett's observation of many technology companies starts from the side, as he said: "at Berkshire, we have a lot of products that use technology." "

For example, he once mentioned Alphabet Inc-CL C search, and Geico is a customer of the search giant. Every time someone enters the Geico website through Alphabet Inc-CL C search, Geico will pay Alphabet Inc-CL C. This kind of business cooperation costs little, and it doesn't need to be on a large scale.

However, Buffett did not invest in Alphabet Inc-CL C, which he thought was a mistake.

4、From a fundamental point of view, HP is an ideal investment.

Look back at Hewlett-Packard.

While we are not sure whether Buffett himself or other Berkshire fund managers made the decision to buy HP, it at least represents Berkshire's decision.

Founded in California in 1939, Hewlett-Packard is a world-renowned multinational company in information technology, focusing on printing, PC, digital imaging and software.

In 2021, hp had a very impressive performance, with revenue of $63.487 billion, a growth rate of 12.1%, and net profit of $6.303 billion, up 128.7%.

Diluted EPS rose 66.2% year-on-year to $3.79, exceeding market expectations of $3.73.

This is due to the company's accelerated digital transformation, actively reducing structural costs, improving efficiency, focusing on the development of incremental business, and expanding the proportion of revenue in key business areas. among them, the quarterly revenue of instant ink and industrial drawing combination is + 20% and 30% respectively compared with the same period last year, and the product portfolio is further optimized.

Hewlett-Packard is an ideal investment, at least in terms of operational fundamentals.

5. HP attaches great importance to shareholder returns.

Another advantage of buying HP is that it is a company that pays a lot of attention to shareholder returns. In fiscal year 2021, HP returned a record $7.2 billion to shareholders, accounting for 170 per cent of free cash flow.

In addition, the company is still actively buying back shares, which is expected to be at least $4 billion in fiscal 2022 and is expected to pay a dividend of $1 per share.

HP's high buyback is a key factor driving up its shareholder returns. HP bought back a total of $6.2 billion of shares in the 2021 fiscal year to October, up 100 per cent from $3.1 billion the previous year.

It has been calculated that at a recent price of $38 and the past 12 months, hp has a dividend yield of 2.6%, a buyback yield of 19.3%, and a consolidated shareholder yield of 21.9%.

Buffett has expressed his love for buybacks countless times, he once said:

When Berkshire buys a company that is buying back shares, I want two things to happen:

First of all, we usually hope that corporate profits will grow well over a long period of time in the future.

First, we also hope that stocks will lag behind the market for quite a long time. "

According to foreign media reports, Hewlett-Packard is likely to be looking at other potential acquisition targets for hardware peripherals. For HP, its future multiple sources of income and potential acquisition targets will focus on hardware devices such as home office and remote collaboration that can optimize mixed work and entertainment scenarios.

The timing of Berkshire's stake suggests that Buffett has agreed with HP's revenue diversification plan and that he may want to reach hardware suppliers that provide remote collaboration solutions in the workplace.

Despite the recent surge in Hewlett-Packard shares, Buffett is currently paying only 5.6x PE, compared with its earnings per share of $6.2p, which is almost a 50% discount to 12 times PE in May 2021.

Obviously, the cheap price is very important.

6、The company is actively controlling costs and has experienced management.

In addition, HP is also accelerating the digital transformation, actively reducing structural costs, improving efficiency, and focusing on the development of incremental business.

From a management point of view, Hewlett-Packard has experienced management. Enrique Lourdes (Enrique Lores), the company's president and CEO, has worked at Hewlett-Packard for more than 30 years, initially as an engineering intern at HP.

He was involved in the process of splitting the old Hewlett-Packard into two listed companies. He was also involved in the company's $1.05 billion acquisition of Samsung Electronics's printer business in 2017.

It is under its leadership that HP has implemented a series of strategic mergers and acquisitions. The most recent was an agreement to buy audio and video maker Poly for $3.3 billion. This is expected to consolidate the company's supply capabilities in headphones, cameras and videoconferencing and collaboration software products, creating synergies.

7、Performance benefits from home work, future performance growth is still in doubt

Buffett's purchase of Hewlett-Packard sent the company up 9.94% to $38.38 a share on the day.

Since the outbreak, factors such as working from home have pushed up returns for PC manufacturers, with HP shares more than tripling from a low in 2020 to an all-time high at the end of March this year. Stocks have been in sideways volatility since May 2021.

But Hewlett-Packard is not without doubts in the market.

Hewlett-Packard's performance last year was mainly affected by factors such as an increase in home work and a rebound in consumption during the post-epidemic period.

However, affected by the economic outlook, the PC industry began to cut orders, including Hewlett-Packard and other large PC manufacturers have begun to lower shipping targets. Hewlett-Packard shares retreated 12% from their peak at the end of March.

UBS analysts believe its shares are "likely to stand still" as the risks / returns have been balanced.

Observations over the past month have seen signs of weakness in the low-end consumer PC market and the company's buybacks are expected to slow after the completion of the deal with Plantronics at the end of 2022. Plantronics's trading may increase earnings by 8 per cent in fiscal year 2022, but it is not without risk.

It can be seen that there are still different voices in the market for the future of Hewlett-Packard.

The real motivation for Berkshire to buy Hewlett-Packard may have to wait until Buffett's own answer at the shareholders' meeting in May.