The stock market has seen extreme turbulence this week, with a big gain on Monday giving way to substantial declines over the past two days. Big uncertainties about exactly how the Federal Reserve will handle interest rates to fight inflation are giving investors headaches, but at least on Thursday morning, it appeared that market participants would get a reprieve from the volatility. As of 8:15 a.m. ET, futures on the Dow Jones Industrial Average (^DJI 0.40%) were up a single point to 34,400. S&P 500 (^GSPC 1.02%) futures had risen 6 points to 4,482, while Nasdaq Composite (^IXIC 2.02%) futures had picked up 38 points to 14,543.
Warren Buffett has been in the headlines lately, with Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) shares having risen to all-time highs in recent weeks. Today, the Oracle of Omaha continued his recent run of major investment moves with another high-profile stock purchase. However, Buffett wasn't the only one taking advantage of current market conditions to make some timely buys. Below, you'll learn why Buffett decided to add HP (HPQ -0.46%) to the Berkshire portfolio, and then you'll see which other stock got good news on Thursday morning.
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HP gets the Buffett stamp of approval
Shares of HP were up 12% in premarket trading on Thursday morning. The move followed filings from Berkshire Hathaway with the U.S. Securities and Exchange Commission reporting the Omaha-based company's acquisition of a massive position in HP stock.
Two filings showed the extent to which Berkshire has invested in HP. An initial ownership filing revealed 109.8 million shares owned by various Berkshire entities as of April 1. A subsequent filing added new purchases between April 4 and April 6 that brought the insurance giant's total holdings to 120.95 million shares. Based on HP's closing price of $34.91 per share on Wednesday, that put the value of Berkshire's HP holdings at $4.2 billion prior to today's jump. That works out to about 11% of the overall company.
The move is just the latest in a series of investments from Berkshire this year. In late March, Berkshire announced it would fully acquire fellow insurer Alleghany in an $11.6 billion takeover. That followed substantial new investment from Berkshire in energy company Occidental Petroleum.
Berkshire investors seemed happy about the deal, as its shares rose slightly in premarket trading. For HP, though, the move represents a vote of confidence in a beaten-down tech hardware stock that still trades at less than 10 times its trailing earnings over the past 12 months.
CDK gets a buyout bid
Elsewhere on the merger and acquisition front, shares of CDK Global (CDK) rose more than 11% in premarket trading Thursday morning. The auto retail technology specialist got an acquisition bid that was too good to pass up.
Brookfield Business Partners (BBU 0.79%) entered into an agreement with CDK under which Brookfield will seek to acquire all of CDK's outstanding shares. The price will be $54.87 per share in cash, which values CDK at $8.3 billion on an enterprise value basis. Although the offer is only about 12% higher than where the stock closed on Wednesday, investors had already bid up CDK in recent weeks in anticipation a deal like this taking shape.
CDK's subscription-based software platform has been popular among auto dealers and other vehicle retailers, including sellers of heavy trucks, construction equipment, agricultural machinery, and recreational vehicles. Yet CDK's shares have largely missed out on the rise among software-as-a-service (SaaS) stocks generally.
Increasingly, promising companies are seeing offers that reflect institutional interest. That should bode well for nervous investors who want reassurance that the growth stocks they own do have intrinsic value and potential buyers in the wings.
