Dodge & Cox Ups Stake in HP

The firm is maintaining its position as the company's top shareholder

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Feb 11, 2020
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Dodge & Cox has recently disclosed that it upped its stake in HP Inc. (HPQ, Financial) by 20.72%. Owning 10.11% of shares outstanding, the firm is HP’s largest institutional shareholder.

With over 80 years of history as an investment company, Dodge & Cox has built a team of professionals that have mostly spent their entire careers with the team. The San Francisco-based mutual fund emphasizes independent research as the heart of each investment, focusing on out-of-favor areas and evaluating companies based on a long-term fundamental outlook and a healthy skepticism of consensus conclusions. The equity portfolio is valued at $121.53 billion.

According to GuruFocus Real-Time Picks, a Premium feature, the firm added 28,160,030 million shares to its position in the computer and printing giant on Jan. 31, bringing the total number of shares owned to 146,883,601 and impacting the equity portfolio by 0.49%. The stock traded around $21.32 per share around that time.

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According to GuruFocus estimates, Dodge & Cox has seen a return of 17.81% on the investment over the past decade.

As of Feb. 11, HP has a market cap of $32.3 billion, a price-earnings ratio of 10.78 and a three-year average share buyback ratio of 5.2%. Its shares traded around $22.23 on Tuesday. GuruFocus has assigned HP a financial strength rating of 6 out of 10 and a profitability rating of 7 out of 10.

According to the Peter Lynch chart, the price is slightly above the stock’s fair value.

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HP, or Hewlett-Packard, is a multinational information technology company based in Palo Alto, California. It mainly develops personal computers and printers (including 3-D printers). PCs account for approximately two-thirds of revenue, while printing accounts for the other third. However, printing is by far the more profitable of the company’s two divisions, as it still brings in more net revenue ($777 million in the fourth quarter of 2019 compared to the PC division’s $556 million).

Overall, HP has seen growth in both revenue and net income in recent years and is showing signs of recovery after falling behind in the 2012 shift to several new modes of computing. When cloud computing hit the markets, smartphones became more common than flip phones and many consumers began choosing tablets over PCs, old-age computer stalwarts like HP suffered a blow. Over the past three years, though, HP has grown its revenue at a rate of 8.5% per year.

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Other top guru shareholders of HP include BlackRock Inc. with 6.87% of shares outstanding, Carl Icahn (Trades, Portfolio) with 4.24% and PRIMECAP Management (Trades, Portfolio) with 3.15%.

Portfolio composition

As of the end of the fourth quarter of 2019, Dodge & Cox’s equity portfolio consisted of 181 stocks. In terms of sector weighting, the firm is most invested in financial services, health care and technology.

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In addition to HP, Dodge & Cox owns stock in several other companies that mainly sell computer hardware, including Apple Inc. (AAPL, Financial), Dell Technologies Inc. (DELL, Financial), Motorola Solutions Inc. (MSI, Financial) and Juniper Networks Inc. (JNPR, Financial).

View the firm's portfolio here.

Disclosure: Author owns no shares in any of the stocks mentioned.

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