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What's going on?

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

What does this mean?

Berkshires 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 Petroleums stock. And now Berkshires adding $4.2 billion worth of HPs stock to that tally a move thatll turn the conglomerate into the PC companys biggest shareholder. Thats an endorsement of HPs shift in strategy if ever there was one: the computer firm recently bought workplace hardware solutions company Poly, and its planning to push deeper into areas like 3D printing and gaming too.

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 Berkshires 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 Berkshires cash mountain to work. Too right: at the current inflation rate, the companys near-$150 billion stockpile would only be able to afford half as many goods and services within 10 years as it can today.

Originally posted as part of the Finimize daily email.

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