WEBVTT - GVA's Garrity on AAPL: iPhone Still Drives Profitability(Audio)

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>This is a Roomberg business flash from Bloomberg World Headquarters.

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<v Speaker 1>I'm Charlie pelt The Dow, the SMP, Nestak all moved

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<v Speaker 1>higher today, s and P five hundred index advancing twenty points,

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<v Speaker 1>a gain of one percent. Nestack picked up one point

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<v Speaker 1>two percent, Hire by fifty seven points to forty seven

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<v Speaker 1>seventy five down. Industrials up one percent, hire by one

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<v Speaker 1>hundred seventy five points. Right now we have got Apple

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<v Speaker 1>shares trading at nine eighty eight. Again, there are three

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<v Speaker 1>point seven percent Apple jumping after Berkshire Hathaway disclosed a

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<v Speaker 1>stake in the iPhone maker. The tenure down fifteen thirty seconds,

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<v Speaker 1>yield one point seven five percent. Gold up three twenty

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<v Speaker 1>the ounce to twelve seventy five, a gain of three

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<v Speaker 1>tenths of one percent, and crewed up three point six percent.

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<v Speaker 1>Hire by a dollar sixty seven of art eighty seven

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<v Speaker 1>on West Texas Intermediate. I'm Charlie Pellett, and that's a

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<v Speaker 1>Bloomberg business slash. You're listening to taking stock with Kathleen

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<v Speaker 1>has and pim Box on Bloomberg Radio, Berkshire Hathaway, Warren

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<v Speaker 1>Buffett and Apple. Shares of Apple, as Charlie Pellett just

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<v Speaker 1>noted up today more than three and a half percent shares,

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<v Speaker 1>though down about eleven so far this year. Kathleen and

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<v Speaker 1>you know Berkshire Hathaway, of course run by Warren Buffett,

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<v Speaker 1>in disclosing in the regulatory filing that they purchased nearly

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<v Speaker 1>ten million shares of Apple during the first quarter. Uh

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<v Speaker 1>It's interesting because Warren Buffett has said in the past

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<v Speaker 1>that he doesn't really understand investing in technology companies and

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<v Speaker 1>as a result he tends to not do so. But

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<v Speaker 1>he does have an investment in IBM, and now he's

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<v Speaker 1>got an investment in Apple well, and of course, whatever

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<v Speaker 1>Warren Buffett does, whether he says it's a tech expert

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<v Speaker 1>or not, interests investors. And the fact that after thirteen

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<v Speaker 1>quarters of growth, I phone sales peaking and not growing

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<v Speaker 1>as fast has hit a lot of investors pretty hard.

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<v Speaker 1>They're wondering if they've seen their best days. And of

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<v Speaker 1>course uh Apples investment indeed, e the Uber of China

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<v Speaker 1>a pretty big deal that was announced on Friday, So

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<v Speaker 1>a lot of reasons now I think for people to

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<v Speaker 1>take another look if they if they were taking, you know,

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<v Speaker 1>having a second look at Apples and raising some doubts.

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<v Speaker 1>Maybe these are two very important pieces of news. Just

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<v Speaker 1>over a couple of days. You mentioned the investment Indeed,

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<v Speaker 1>which is the ride sharing app that exists in China.

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<v Speaker 1>There was an item having to do with that investment

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<v Speaker 1>saying that they might plan to have an initial public

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<v Speaker 1>offering and as a result, Apple shareholders may actually make

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<v Speaker 1>money on this potential I p O. If it happens

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<v Speaker 1>a lot faster than anyone had thought the investment would

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<v Speaker 1>pay off. In other words, it's not just an investment

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<v Speaker 1>to perhaps put your iPhone and your map function in uh,

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<v Speaker 1>it's also a way to benefit from burgeoning use of

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<v Speaker 1>this kind of sharing economy. Here to tell us little

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<v Speaker 1>bit more about Apple and Berkshire Hathaway's investment is David Garretty.

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<v Speaker 1>He is a principal at g v A Research. Thank

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<v Speaker 1>you very much for being here. David. What do you

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<v Speaker 1>make of Berkshire Hathaway investing about a billion dollars? I

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<v Speaker 1>think the average price on the stock for them was

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<v Speaker 1>about a hundred and nine dollars a share today Apple

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<v Speaker 1>trades at which arguably says that potentially, if they liked

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<v Speaker 1>at that level, they at this level, they should be

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<v Speaker 1>buying more. Some people have raised questions about how a

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<v Speaker 1>stute Berkshire Hathaway has been in terms of investing in

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<v Speaker 1>the technology sector. In the past, they had put a

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<v Speaker 1>position in place with IBM. Their position is now about

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<v Speaker 1>below where it was what they bought it. Uh. One

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<v Speaker 1>might argue that in terms of looking at the company Apple,

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<v Speaker 1>you're looking at a company that from financial standpoint is stronger. UM.

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<v Speaker 1>So I think in that standpoint, Um, you know Buffetts

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<v Speaker 1>certainly from the perspective of trading the stock, not that

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<v Speaker 1>he does that, but if you were trading the stock

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<v Speaker 1>around the iPhone seven introduction coming in September, this is

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<v Speaker 1>not a bad time to necessarily be buying it. Um.

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<v Speaker 1>To look at the investment in d D, the Chinese

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<v Speaker 1>China based rides sharing service, where Apple invested a billion dollars,

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<v Speaker 1>I mean, certainly this is an investment that looks to

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<v Speaker 1>be affecting not only perhaps the research and development costs

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<v Speaker 1>that Apple might have incurred around the Apple Car, but

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<v Speaker 1>potentially be doing it in a way which is going

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<v Speaker 1>to potentially limit the cost. If indeed d D does

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<v Speaker 1>have an I p O in two thousand and seventeen

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<v Speaker 1>um and certainly the d D I p O would

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<v Speaker 1>be expected to be the largest Chinese IPO in the

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<v Speaker 1>United States since Ali Baba's IPO, which occurred back in

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<v Speaker 1>November of two thousands. When you look at d D

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<v Speaker 1>and you look at Tim Cook's on people, there's been

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<v Speaker 1>some criticism right that, Okay, the iPhones, it's a commodity smartphones,

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<v Speaker 1>et cetera. And Tim Cook needs to come up with

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<v Speaker 1>something the fact that he's putting his money into d

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<v Speaker 1>D going into China, especially the time when the Chinese

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<v Speaker 1>regulators just shut down the eye book service and another

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<v Speaker 1>one right, uh, political optics, et cetera. Does this show

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<v Speaker 1>Tim Cook raising the game or does it show a

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<v Speaker 1>little desperation on his part? I don't think it shows

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<v Speaker 1>necessarily desperation. I mean, clearly they have a vast amount

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<v Speaker 1>of cash over over two and twenty billion dollars, so

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<v Speaker 1>just between friends, what's a billion the but but no,

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<v Speaker 1>I mean this is an investment which potentially works on

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<v Speaker 1>a number of levels, and and from my perspective, on this,

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<v Speaker 1>I think the best aspect of it is if Apple

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<v Speaker 1>is spending money on Project Titan, which is their research

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<v Speaker 1>into the automotive sector, rather than incur a research and

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<v Speaker 1>development cost, they now in effect have perhaps found a

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<v Speaker 1>test bed in d D, and this test bed to

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<v Speaker 1>the extent that it does go public at a greater

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<v Speaker 1>valuation than what they're buying in at certainly it helps

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<v Speaker 1>them perhaps de phray some of the research development cost

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<v Speaker 1>maybe make it's depending upon how DD performs, you know, um,

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<v Speaker 1>substantially lower cost outlay. David, does this demonstrate really how

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<v Speaker 1>bizarre the investment market is? When just two weeks ago

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<v Speaker 1>you had just about every expert in the world talking

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<v Speaker 1>about how terrible of investment Apple would be because of

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<v Speaker 1>the slowing growth, and iPhone said you couldn't get anyone

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<v Speaker 1>to say something positive about Apple. Now you're getting people

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<v Speaker 1>all rushing over falling over themselves to say something positive

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<v Speaker 1>about Apple because Warren Buffetts, Berkshire Hathaway has bought the stock.

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<v Speaker 1>I mean, is that really any way to what guide

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<v Speaker 1>your portfolio or investment? Yes's it's it's it's a heck

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<v Speaker 1>of way to manage money, and to some extent, we're

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<v Speaker 1>sort of victims of the calendar here because clearly you

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<v Speaker 1>have the filing deadlines coming forty five days after the

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<v Speaker 1>end of the quarter. Um so you know, certainly when

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<v Speaker 1>everybody was making their exits, and when David Tepler from

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<v Speaker 1>Apple Loosa was making his exit from Apple, you know,

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<v Speaker 1>Warren Buffett was on the other side of the trade.

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<v Speaker 1>When Carl Icon was making his exit from Apple, Warren

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<v Speaker 1>Buffett was on the other side of the trade. Okay,

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<v Speaker 1>would you buy Apple? Do you own Apple? Now? I

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<v Speaker 1>do own Apple. I mean I've owned Apple for a

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<v Speaker 1>long time, and what I consider buying it at these levels? Yes,

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<v Speaker 1>I would consider doing that in part for you know,

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<v Speaker 1>the short term bump that you'll get out of the

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<v Speaker 1>iPhone seven. You know, we'll have to see how everything

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<v Speaker 1>else develops in terms of these other product initiatives, but certainly,

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<v Speaker 1>as we know, the iPhone will remain the driver of

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<v Speaker 1>profitability for this company for you know, probably at least

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<v Speaker 1>you know, the next twelve eighteen months. Okay, mcgartty, thank

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<v Speaker 1>you so very much for joining us. He's principal at

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<v Speaker 1>g d A Research, joining us today in our New

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<v Speaker 1>York studio. Let's thank Sarah Fishman for joining us as

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<v Speaker 1>our technical director today. Sam Manga our producer day in

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<v Speaker 1>and day out. And I'm Catheine Has along with Pim Fox,

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<v Speaker 1>and this is Bloomberg Radio coming up Bloomberg Lawn. It's

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