Daily Brief: Buffett Has Given PC-Maker HP His Coveted Seal Of Approval

Daily Brief: Buffett Has Given PC-Maker HP His Coveted Seal Of Approval

almost 2 years ago3 mins

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Filings this week showed that Berkshire Hathaway has bought a stake in HP – the third company to get Buffett’s multibillion dollar stamp of approval in the last few weeks.

What does this mean?

Berkshire’s investments are like buses: you wait an eternity for one, and three come along at once. First, the conglomerate bought insurance firm Alleghany for $12 billion, following up with $8 billion worth of Occidental Petroleum’s stock. And now Berkshire’s adding $4.2 billion worth of HP’s stock to that tally – a move that’ll turn the conglomerate into the PC company’s biggest shareholder. That’s an endorsement of HP’s shift in strategy if ever there was one: the computer firm recently bought workplace hardware solutions company Poly, and it’s planning to push deeper into areas like 3D printing and gaming too.

HP jumps

Why should I care?

Zooming in: “Be greedy when others are fearful.”

This sudden bullishness makes sense: the combination of interest rate hikes and the Ukrainian war have knocked global stock markets, which means Berkshire – which specializes in finding stocks that are going cheap – can do exactly that. Thing is, stocks are down all over the world, so the fact that Berkshire’s chosen three American companies has made analysts hopeful that Buffett sees long-term growth in the US – even if there is a slowdown in the meantime.

The bigger picture: Inflation hurts.

Buffett has previously warned against holding too much cash at the best of times, given that its value will just be eroded by inflation. So these latest purchases might just be a savvy way to put Berkshire’s cash mountain to work. Too right: at the current inflation rate, the company’s near-$150 billion stockpile would only be able to afford half as many goods and services within 10 years as it can today.

Cash pile

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Eurozone Retail Sales Disappointed

Eurozone retail sales image

Data out on Thursday showed that European retail sales didn’t grow as fast as expected in February, but those pennies aren’t exactly going to pinch themselves.

What does this mean?

Retail sales in Europe rose just 0.3% in February from the month before – short of the 0.6% economists were expecting. And this is before the effects of war in Ukraine really came to a head, which is a problem: European consumer confidence has only been falling – and inflation only rising – ever since. And given that consumer spending makes up a huge chunk of the region’s economy, economists think the slowdown will play a major part in dragging down economic growth this quarter.

Retail sales

Why should I care?

The bigger picture: Be more direct.

With retailers making fewer sales, they’re looking for ways to profit more from those they are making. So they’ve been veering away from wholesalers and third-party marketplaces, which take a cut of the profits and hoard data on shopping habits for themselves. Levi’s knows what’s up: “direct sales” – those that cut out the middleman – made up around 40% of its total sales last quarter, helping the denim giant grow its profit by a better-than-expected 37%.

Zooming out: Crypto has you covered.

We know what you’re thinking: couldn’t European businesses just let shoppers pay with bitcoin to boost business? That same question might’ve crossed Bolt Financial’s mind: the US company – which specializes in online checkout operating systems – announced on Thursday that it’s buying crypto infrastructure provider Wyre Payments for a reported $1.5 billion. Bolt – which counts major retailers like Forever 21 and Juicy Couture as customers – is looking to incorporate digital currency payments onto its platform, in a bid to make paying for Ben & Jerry’s with crypto the norm.

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