Latest / Bloomberg Intelligence / GVA's Garrity on AAPL: iPhone Still Drives Profitability(Audio)

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GVA's Garrity on AAPL: iPhone Still Drives Profitability(Audio) · Bloomberg Intelligence

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  Speaker 1: Global business news twenty four hours a day at Bloomberg
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  Speaker 1: This is a Roomberg business flash from Bloomberg World Headquarters.
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  Speaker 1: I'm Charlie pelt The Dow, the SMP, Nestak all moved
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  Speaker 1: higher today, s and P five hundred index advancing twenty points,
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  Speaker 1: two percent, Hire by fifty seven points to forty seven
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  Speaker 1: seventy five down. Industrials up one percent, hire by one
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  Speaker 1: hundred seventy five points. Right now we have got Apple
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  Speaker 1: shares trading at nine eighty eight. Again, there are three
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  Speaker 1: point seven percent Apple jumping after Berkshire Hathaway disclosed a
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  Speaker 1: stake in the iPhone maker. The tenure down fifteen thirty seconds,
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  Speaker 1: yield one point seven five percent. Gold up three twenty
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  Speaker 1: the ounce to twelve seventy five, a gain of three
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  Speaker 1: tenths of one percent, and crewed up three point six percent.
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  Speaker 1: Hire by a dollar sixty seven of art eighty seven
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  Speaker 1: on West Texas Intermediate. I'm Charlie Pellett, and that's a
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  Speaker 1: Bloomberg business slash. You're listening to taking stock with Kathleen
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  Speaker 1: has and pim Box on Bloomberg Radio, Berkshire Hathaway, Warren
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  Speaker 1: Buffett and Apple. Shares of Apple, as Charlie Pellett just
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  Speaker 1: noted up today more than three and a half percent shares,
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  Speaker 1: though down about eleven so far this year. Kathleen and
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  Speaker 1: you know Berkshire Hathaway, of course run by Warren Buffett,
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  Speaker 1: in disclosing in the regulatory filing that they purchased nearly
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  Speaker 1: ten million shares of Apple during the first quarter. Uh
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  Speaker 1: It's interesting because Warren Buffett has said in the past
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  Speaker 1: that he doesn't really understand investing in technology companies and
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  Speaker 1: as a result he tends to not do so. But
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  Speaker 1: he does have an investment in IBM, and now he's
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  Speaker 1: got an investment in Apple well, and of course, whatever
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  Speaker 1: Warren Buffett does, whether he says it's a tech expert
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  Speaker 1: or not, interests investors. And the fact that after thirteen
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  Speaker 1: quarters of growth, I phone sales peaking and not growing
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  Speaker 1: as fast has hit a lot of investors pretty hard.
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  Speaker 1: They're wondering if they've seen their best days. And of
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  Speaker 1: course uh Apples investment indeed, e the Uber of China
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  Speaker 1: a pretty big deal that was announced on Friday, So
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  Speaker 1: a lot of reasons now I think for people to
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  Speaker 1: take another look if they if they were taking, you know,
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  Speaker 1: having a second look at Apples and raising some doubts.
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  Speaker 1: Maybe these are two very important pieces of news. Just
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  Speaker 1: over a couple of days. You mentioned the investment Indeed,
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  Speaker 1: which is the ride sharing app that exists in China.
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  Speaker 1: There was an item having to do with that investment
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  Speaker 1: saying that they might plan to have an initial public
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  Speaker 1: offering and as a result, Apple shareholders may actually make
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  Speaker 1: money on this potential I p O. If it happens
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  Speaker 1: a lot faster than anyone had thought the investment would
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  Speaker 1: pay off. In other words, it's not just an investment
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  Speaker 1: to perhaps put your iPhone and your map function in uh,
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  Speaker 1: it's also a way to benefit from burgeoning use of
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  Speaker 1: this kind of sharing economy. Here to tell us little
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  Speaker 1: bit more about Apple and Berkshire Hathaway's investment is David Garretty.
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  Speaker 1: He is a principal at g v A Research. Thank
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  Speaker 1: you very much for being here. David. What do you
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  Speaker 1: make of Berkshire Hathaway investing about a billion dollars? I
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  Speaker 1: think the average price on the stock for them was
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  Speaker 1: about a hundred and nine dollars a share today Apple
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  Speaker 1: trades at which arguably says that potentially, if they liked
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  Speaker 1: at that level, they at this level, they should be
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  Speaker 1: buying more. Some people have raised questions about how a
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  Speaker 1: stute Berkshire Hathaway has been in terms of investing in
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  Speaker 1: the technology sector. In the past, they had put a
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  Speaker 1: position in place with IBM. Their position is now about
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  Speaker 1: below where it was what they bought it. Uh. One
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  Speaker 1: might argue that in terms of looking at the company Apple,
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  Speaker 1: you're looking at a company that from financial standpoint is stronger. UM.
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  Speaker 1: So I think in that standpoint, Um, you know Buffetts
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  Speaker 1: certainly from the perspective of trading the stock, not that
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  Speaker 1: he does that, but if you were trading the stock
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  Speaker 1: around the iPhone seven introduction coming in September, this is
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  Speaker 1: not a bad time to necessarily be buying it. Um.
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  Speaker 1: To look at the investment in d D, the Chinese
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  Speaker 1: China based rides sharing service, where Apple invested a billion dollars,
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  Speaker 1: I mean, certainly this is an investment that looks to
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  Speaker 1: be affecting not only perhaps the research and development costs
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  Speaker 1: that Apple might have incurred around the Apple Car, but
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  Speaker 1: potentially be doing it in a way which is going
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  Speaker 1: to potentially limit the cost. If indeed d D does
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  Speaker 1: have an I p O in two thousand and seventeen
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  Speaker 1: um and certainly the d D I p O would
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  Speaker 1: be expected to be the largest Chinese IPO in the
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  Speaker 1: United States since Ali Baba's IPO, which occurred back in
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  Speaker 1: November of two thousands. When you look at d D
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  Speaker 1: and you look at Tim Cook's on people, there's been
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  Speaker 1: some criticism right that, Okay, the iPhones, it's a commodity smartphones,
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  Speaker 1: et cetera. And Tim Cook needs to come up with
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  Speaker 1: something the fact that he's putting his money into d
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  Speaker 1: D going into China, especially the time when the Chinese
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  Speaker 1: regulators just shut down the eye book service and another
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  Speaker 1: one right, uh, political optics, et cetera. Does this show
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  Speaker 1: Tim Cook raising the game or does it show a
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  Speaker 1: little desperation on his part? I don't think it shows
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  Speaker 1: necessarily desperation. I mean, clearly they have a vast amount
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  Speaker 1: of cash over over two and twenty billion dollars, so
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  Speaker 1: just between friends, what's a billion the but but no,
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  Speaker 1: I mean this is an investment which potentially works on
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  Speaker 1: a number of levels, and and from my perspective, on this,
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  Speaker 1: I think the best aspect of it is if Apple
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  Speaker 1: is spending money on Project Titan, which is their research
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  Speaker 1: into the automotive sector, rather than incur a research and
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  Speaker 1: development cost, they now in effect have perhaps found a
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  Speaker 1: test bed in d D, and this test bed to
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  Speaker 1: the extent that it does go public at a greater
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  Speaker 1: valuation than what they're buying in at certainly it helps
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  Speaker 1: them perhaps de phray some of the research development cost
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  Speaker 1: maybe make it's depending upon how DD performs, you know, um,
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  Speaker 1: substantially lower cost outlay. David, does this demonstrate really how
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  Speaker 1: bizarre the investment market is? When just two weeks ago
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  Speaker 1: you had just about every expert in the world talking
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  Speaker 1: about how terrible of investment Apple would be because of
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  Speaker 1: the slowing growth, and iPhone said you couldn't get anyone
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  Speaker 1: to say something positive about Apple. Now you're getting people
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  Speaker 1: all rushing over falling over themselves to say something positive
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  Speaker 1: about Apple because Warren Buffetts, Berkshire Hathaway has bought the stock.
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  Speaker 1: I mean, is that really any way to what guide
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  Speaker 1: your portfolio or investment? Yes's it's it's it's a heck
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  Speaker 1: of way to manage money, and to some extent, we're
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  Speaker 1: sort of victims of the calendar here because clearly you
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  Speaker 1: have the filing deadlines coming forty five days after the
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  Speaker 1: end of the quarter. Um so you know, certainly when
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  Speaker 1: everybody was making their exits, and when David Tepler from
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  Speaker 1: Apple Loosa was making his exit from Apple, you know,
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  Speaker 1: Warren Buffett was on the other side of the trade.
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  Speaker 1: When Carl Icon was making his exit from Apple, Warren
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  Speaker 1: Buffett was on the other side of the trade. Okay,
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  Speaker 1: would you buy Apple? Do you own Apple? Now? I
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  Speaker 1: do own Apple. I mean I've owned Apple for a
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  Speaker 1: long time, and what I consider buying it at these levels? Yes,
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  Speaker 1: I would consider doing that in part for you know,
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  Speaker 1: the short term bump that you'll get out of the
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  Speaker 1: iPhone seven. You know, we'll have to see how everything
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  Speaker 1: else develops in terms of these other product initiatives, but certainly,
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  Speaker 1: as we know, the iPhone will remain the driver of
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  Speaker 1: profitability for this company for you know, probably at least
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  Speaker 1: you know, the next twelve eighteen months. Okay, mcgartty, thank
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  Speaker 1: you so very much for joining us. He's principal at
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  Speaker 1: g d A Research, joining us today in our New
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  Speaker 1: York studio. Let's thank Sarah Fishman for joining us as
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  Speaker 1: our technical director today. Sam Manga our producer day in
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  Speaker 1: and day out. And I'm Catheine Has along with Pim Fox,
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