What Apple’s blowout earnings means for Berkshire Hathaway

Krish Sankar, Managing Dir. & Cowen Senior Research Analyst, joins Yahoo Finance’s Sibile Marcellus and Alexis Christoforous to discuss expectations for Berkshire Hathaway’s shareholders meeting.

Video Transcript

- The Berkshire Hathaway annual shareholders meeting is taking place in LA this year and it will be streamed exclusively here on Yahoo Finance tomorrow. I want to bring in Krish Sankar, Managing Director and Cohen Senior Research Analyst.

Now Apple is one of the biggest holdings in the Berkshire Hathaway portfolio. What's your take on Apple's blow-out earnings and what that means for Berkshire?

KRISH SANKAR: So thanks for having me. Clearly the numbers from Apple were way beyond impressive. The expectations were actually relatively low. And Apple really blew past all the numbers across all the metrics, whether it was iPhone, iPad, Macs, and services. So it was definitely a very impressive quarter. And clearly, the margins have also improved pretty nicely. That kind of speaks to both Apple's scale and also execution.

And I think the other thing that is also being a point of concern has been the sustainability of [INAUDIBLE], which has been the number one question for many investors. But if you roll it all together, Apple's executing way above and the numbers are extremely impressive. Stocks in the ecosystem, [INAUDIBLE] in the line installed base. And I would probably say, in the long run, it's definitely very positive for the stock and for the shareholders.

- Krish, I want to ask you about semiconductor stocks, which I know you also follow very closely. And we've seen this pattern where companies are beating, they're guiding higher, yet their stocks are not being rewarded. We saw this with AMD, with Texas Instruments, Nvidia. Why is that happening? Why are they just not impressing investors?

KRISH SANKAR: Yeah, I think it's a very good question. And if you look at some of the names in there, what I would characterize as the semi, semi [INAUDIBLE] ecosystem, calendar Q1 was a strong quarter for [INAUDIBLE]. You saw the numbers move higher. You saw some of the stocks do really very well. And what we have seen is a lot of the analysts [INAUDIBLE] many of the positive news for this year is actually discounted in some of these names. And that's why you're seeing some profit taking on a beat [INAUDIBLE].

And the flip side is that you're seeing some of the small and mid-cap names that actually had what I would characterize as in-line numbers, or even a modest miss, has been punished a lot, [INAUDIBLE] these down 10% to 20% the next day. So I think beating rates is not being rewarded because most investors are baking in a very strong 2021.

So really, the question that happens, what happens in the second half of this year, when you get visibility into calendar 2022? And also, keep in mind, some of this also [INAUDIBLE] from fund managers moving from cyclical, maybe looking at like low multiple names, but also looking at maybe like, you know, some of the [INAUDIBLE] names heading back into the back half.

So I would say it's a combination of positioning from fund managers, along with the fact that a lot of the good news with this year seems to be discarded [INAUDIBLE].

- Well, Krish Sankar, thanks so much.