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

hundred seventy five points. Right now we have got Apple shares trading at nine eighty eight. Again, there are three point seven percent Apple jumping after Berkshire Hathaway disclosed a stake in the iPhone maker. The tenure down fifteen thirty seconds, yield one point seven five percent. Gold up three twenty the ounce to twelve seventy five, a gain of three tenths of one percent, and crewed up three point six percent. Hire by a dollar sixty seven of art eighty seven

on West Texas Intermediate. I'm Charlie Pellett, and that's a Bloomberg business slash. You're listening to taking stock with Kathleen has and pim Box on Bloomberg Radio, Berkshire Hathaway, Warren Buffett and Apple. Shares of Apple, as Charlie Pellett just noted up today more than three and a half percent shares, though down about eleven so far this year. Kathleen and you know Berkshire Hathaway, of course run by Warren Buffett, in disclosing in the regulatory filing that they purchased nearly

ten million shares of Apple during the first quarter. Uh It's interesting because Warren Buffett has said in the past that he doesn't really understand investing in technology companies and as a result he tends to not do so. But he does have an investment in IBM, and now he's got an investment in Apple well, and of course, whatever Warren Buffett does, whether he says it's a tech expert

or not, interests investors. And the fact that after thirteen quarters of growth, I phone sales peaking and not growing as fast has hit a lot of investors pretty hard. They're wondering if they've seen their best days. And of course uh Apples investment indeed, e the Uber of China a pretty big deal that was announced on Friday, So a lot of reasons now I think for people to take another look if they if they were taking, you know, having a second look at Apples and raising some doubts.

Maybe these are two very important pieces of news. Just over a couple of days. You mentioned the investment Indeed, which is the ride sharing app that exists in China. There was an item having to do with that investment saying that they might plan to have an initial public offering and as a result, Apple shareholders may actually make money on this potential I p O. If it happens a lot faster than anyone had thought the investment would

pay off. In other words, it's not just an investment to perhaps put your iPhone and your map function in uh, it's also a way to benefit from burgeoning use of this kind of sharing economy. Here to tell us little bit more about Apple and Berkshire Hathaway's investment is David Garretty. He is a principal at g v A Research. Thank you very much for being here. David. What do you

make of Berkshire Hathaway investing about a billion dollars? I think the average price on the stock for them was about a hundred and nine dollars a share today Apple trades at which arguably says that potentially, if they liked at that level, they at this level, they should be buying more. Some people have raised questions about how a stute Berkshire Hathaway has been in terms of investing in the technology sector. In the past, they had put a

position in place with IBM. Their position is now about below where it was what they bought it. Uh. One might argue that in terms of looking at the company Apple, you're looking at a company that from financial standpoint is stronger. UM. So I think in that standpoint, Um, you know Buffetts certainly from the perspective of trading the stock, not that he does that, but if you were trading the stock around the iPhone seven introduction coming in September, this is

not a bad time to necessarily be buying it. Um. To look at the investment in d D, the Chinese China based rides sharing service, where Apple invested a billion dollars, I mean, certainly this is an investment that looks to be affecting not only perhaps the research and development costs that Apple might have incurred around the Apple Car, but potentially be doing it in a way which is going

to potentially limit the cost. If indeed d D does have an I p O in two thousand and seventeen um and certainly the d D I p O would be expected to be the largest Chinese IPO in the United States since Ali Baba's IPO, which occurred back in November of two thousands. When you look at d D and you look at Tim Cook's on people, there's been some criticism right that, Okay, the iPhones, it's a commodity smartphones,

et cetera. And Tim Cook needs to come up with something the fact that he's putting his money into d D going into China, especially the time when the Chinese regulators just shut down the eye book service and another one right, uh, political optics, et cetera. Does this show Tim Cook raising the game or does it show a little desperation on his part? I don't think it shows

necessarily desperation. I mean, clearly they have a vast amount of cash over over two and twenty billion dollars, so just between friends, what's a billion the but but no, I mean this is an investment which potentially works on a number of levels, and and from my perspective, on this, I think the best aspect of it is if Apple is spending money on Project Titan, which is their research into the automotive sector, rather than incur a research and

development cost, they now in effect have perhaps found a test bed in d D, and this test bed to the extent that it does go public at a greater valuation than what they're buying in at certainly it helps them perhaps de phray some of the research development cost maybe make it's depending upon how DD performs, you know, um, substantially lower cost outlay. David, does this demonstrate really how

bizarre the investment market is? When just two weeks ago you had just about every expert in the world talking about how terrible of investment Apple would be because of the slowing growth, and iPhone said you couldn't get anyone to say something positive about Apple. Now you're getting people all rushing over falling over themselves to say something positive about Apple because Warren Buffetts, Berkshire Hathaway has bought the stock. I mean, is that really any way to what guide

your portfolio or investment? Yes's it's it's it's a heck of way to manage money, and to some extent, we're sort of victims of the calendar here because clearly you have the filing deadlines coming forty five days after the end of the quarter. Um so you know, certainly when everybody was making their exits, and when David Tepler from Apple Loosa was making his exit from Apple, you know, Warren Buffett was on the other side of the trade. When Carl Icon was making his exit from Apple, Warren

Buffett was on the other side of the trade. Okay, would you buy Apple? Do you own Apple? Now? I do own Apple. I mean I've owned Apple for a long time, and what I consider buying it at these levels? Yes, I would consider doing that in part for you know, the short term bump that you'll get out of the

iPhone seven. You know, we'll have to see how everything else develops in terms of these other product initiatives, but certainly, as we know, the iPhone will remain the driver of profitability for this company for you know, probably at least you know, the next twelve eighteen months. Okay, mcgartty, thank you so very much for joining us. He's principal at g d A Research, joining us today in our New York studio. Let's thank Sarah Fishman for joining us as

our technical director today. Sam Manga our producer day in and day out. And I'm Catheine Has along with Pim Fox, and this is Bloomberg Radio coming up Bloomberg Lawn. It's brought to you by Deutsch Atkins PC. If you feel you've been unlawfully terminated, you over to yourself to call the law from Deutsch Atkins. Now for a free phone consultation, call eight hundred