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Warren Buffett has made tens of billions of dollars from buying dull, industrial companies at staid prices. Despite its Silicon Valley headquarters, the Sage of Omaha’s latest target should be considered in that same genre. A securities filing disclosed Berkshire Hathaway had acquired an 11 per cent stake in HP Inc, formerly known as Hewlett-Packard, late on Wednesday.

The company had become a sprawling technology conglomerate over the decades but in 2015 it separated its corporate software unit, now known as the listed company HP Enterprise.

The legacy HP that Buffett is investing in sells PCs, printers and other hardware peripherals. Since the start of 2020 it shares have roughly doubled in large part because of the homeworking boom during the pandemic. These large established companies get investors excited not so much with newfangled products but an emphasis on cost efficiency, tight working capital management and careful capital allocation that weathers economic cycles.

HP generated more than $64bn of sales in its fiscal 2021 year, up more than a tenth from 2020. In contrast, in 2018 and 2019, revenue was roughly $59bn in both years, reflecting the pandemic era bump for what was an otherwise stagnant company. Last year HP generated more than $4bn in free cash flow but was able to return more than $7bn in dividends and buybacks.

The 2015 separation was supposed to unshackle a high-growth, high-margin corporate software business from the fading commodities of printers and PCs which were thought to be dying in a mobile world. In the fourth quarter of 2021, units of notebook computers and printers sold fell by a sharp double digits. But higher selling prices allowed revenue to still grow.

Where HP goes after its recent boom remains a question. HP shares jumped more than 15 per cent after the Berkshire stake was disclosed. Yet the company still only trades at about 10 times forward earnings even as EPS is expected to grow more than a tenth in 2022. Then again, the Buffett halo on a steady plodder may prove to be a bright enough shine during volatile times.

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