HP: Key In On Whitworth, Not Whitman

| About: HP Inc. (HPQ)

I've been trumpeting HP (NYSE:HPQ) as a short play, predicting shares would tumble to $20. They hit that price target May 23. Now, I'm changing my tune: HP is no longer a sell. In fact, it's worth acquiring at these levels.

The reason: Insider buying. And not just any insider buying - a voracious swallowing down of stock led by corporate director Ralph Whitworth.

Whitworth's has placed a big bet. Since May 25, he's bought $400 million of stock at an average $22 price. On May 29 and May 30, his purchases represented over 20% of traded shares. He's gone from owning zero shares to holding HP's largest inside position, all in one week. That's ballsy.

He's not alone. Chairman Raymond Lane purchased $3 million of HP, a sizable buy, yet no where near as eye-popping as Whitworth's $400 million.

Whitworth is Relational Investors co-founder and an activist shareholder, famous for his role in ousting Home Depot's (NYSE:HD) Bob Nardelli. His specialty is taking huge stakes in underperforming companies and pushing for change. Whitworth will likely shake-up what was a very dysfunctional board. In fact, he may be guiding CEO Meg Whitman' recent moves.

Three reasons this insider buying is bullish:

  1. This isn't a token purchase. It's colossal. How many insiders buy $400 million for their personal accounts?

  2. Since May 25, investors sold 18 million HP shares to insiders - a case of the extremely knowledgeable taking stock from the less informed.

  3. Whitworth became director last November. This is his first buy. My take: His suggestions are being enacted.

Four hundred million dollars, that's real conviction. You've got to believe Whitworth is on to something. I would not want to bet against him.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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