How well-capped helps well-capped?

Buffett Buys Stake in HP, pushed HP stock up

Berkshire Hathaway took an 11.4% stake in HP recently, valued at $4.2 billion. This is a tremendous advancement in what HP was most likely expecting. Last Thursday alone, HP closed up $5.15 or 14.8% at $40.06 after earlier rising to $41.46.

This shows an example of how things can change very quickly (sometimes for the better) when it comes to a company’s stake placed in another company. Take a look at the following chart showing a before and after picture of what went on before Thursday with HP, and what came about once Buffett became involved:

The stock price was $34.61 on April 6th, and jumped to $39.03 just the stock market opened. The trading volume also soared, buying volume, which pushed the stock price higher.

Keep in mind that a change such as this usually only comes on occasions where an extremely lucrative company gets involved. What we tend to see time and again is what I coin the term to be, that  “well-capped helps well-capped,” meaning that one well-capitalized company (in this case Berkshire Hathaway) helps another well-capitalized company (HP). 

But are there cases where a well-capped company can help a smaller capped company? Target and Walmart are the two companies that are helping small businesses. Take a look at the below chart which is extracted from moomoo app that shows what they have been up to:

It just goes to show you that while “well-capped helps well-capped”, a big well-capitalized company can also help a small business. Good to know that help is all around.