Berkshire Buys 11% Of HP In 3rd Major Deal Since Declaring Equities ‘Overvalued’

After a years-long period of relative inactivity, Warren Buffett’s Berkshire Hathaway has been on a bit of a buying spree lately, first buying the insurance company Alleghany, before disclosing late yesterday that the company had purchased about 121 million shares in HP – a roughly 8.8% stake in the company – worth about $4.2 billion.

HP shares surged 9.9% to $38.38 in after-hours trading after Berkshire disclosed the stake in an SEC Form 4. Ironically, the deal is Buffett’s third since the release of his latest letter to shareholders, where he claimed that equity valuations were too stretched to offer good dealmaking opportunities (“we find little that excites us,” Buffett wrote at the time).

In addition to buying Alleghany, Berkshire also bought Carl Icahn’s stake in Occidental Petroleum (leaving Icahn with a profit of roughly $2 billion).

According to Reuters, which approached Berkshire for comment, Berkshire wouldn’t specify whether Buffett himself, or his portfolio managers Todd Combs and/or Ted Weschler, were responsible for the HP stake (although Buffett normally handles larger investments made by the company).

In his latest letter, Buffett declared Berkshire’s insurance business the first of four “giants” accounting for much of the company’s revenue.

That cluster of insurance operations, which includes GEICO, MedPro, National Indemnity, generates a massive cash “float” that is now worth more than $147 billion.

Before announcing the Alleghany deal, Berkshire had gone six years without a buyout, preferring during that period to invest in fractions of companies via public equity.