WASHINGTON, DC — The last few months have been a busy for Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A.US) (NYSE: BRK-B.US ) and today we learned its buying spree continued.

It was announced yesterday Berkshire has come to an agreement with Procter & Gamble (NYSE: PG.US) to buy battery manufacturer Duracell in exchange for the $4.7 billion worth of Procter & Gamble shares Berkshire held.

The details

At the end of June, Berkshire held roughly 53 million shares of Procter & Gamble worth nearly $4.2 billion, and since then P&G has seen its stock rise by almost 15%, explaining the $4.7 billion price tag.

When P&G released its earnings for the first quarter of fiscal 2015, it also announced that it would be exiting the Duracell business, preferably through the creation of a stand-alone company. At the time of the announcement, P&G’s CEO A.G. Lafley said:

“We greatly appreciate the contributions of our Duracell employees. Since we acquired the business in 2005 as part of Gillette, Duracell has strengthened its position as the global market leader in the battery category. It’s a business with attractive operating profit margins and a history of strong cash generation. I’m confident the business and its employees will continue to thrive as its own company.”

Then, P&G noted the reason behind the move was “consistent with its plans to focus and strengthen its brand and category portfolio,” and that “its goals in the process of exiting this business are to maximize value to P&G’s shareholders and minimize earnings per share dilution.”

Today, P&G noted that the $4.7 billion price tag for Duracell would represent an adjusted earnings before interest taxes and depreciation, or EBITDA, of seven-times fiscal year 2014’s.

The rationale 

So, why would Buffett make such a move?

First, as highlighted by many news outlets like Bloomberg, similar to Berkshire’s previous deals in acquiring an energy subsidiary from Phillips 66 earlier this year, by exchanging P&G stock for the entirety of Duracell, Berkshire will be able to abstain from paying any capital gains taxes as if the P&G shares had been sold for cash.

Considering that the P&G stake stood on Berkshire’s books at a cost basis of just $336 million at the beginning of this year, the tax savings alone are a compelling value proposition for Berkshire Hathaway and its shareholders.

Also, knowing at heart Buffett’s always been a proponent of buying businesses at an appropriate price, the fact that the market traded at an 11.5-times EBITDA multiple in January of this year, according to the Stern School of Business at NYU, and the consumer electronics industry traded at nine-times EBITDA, then the $4.7 billion price tag seems more than reasonable.

In last year’s letter to Berkshire Hathaway shareholders, Buffett wrote that “more than 50 years ago, Charlie [Munger] told me that it was far better to buy a wonderful business at a fair price than to buy a fair business at a wonderful price.”

So, the consideration of the deal must extend beyond just the financial aspects of it. And Buffett’s words regarding the deal are quite telling.

In today’s announcement Buffett said:

I have always been impressed by Duracell, as a consumer and as a long-term investor in P&G and Gillette. Duracell is a leading global brand with top quality products, and it will fit well within Berkshire Hathaway.

It is of note that Buffett mentioned the Duracell brand first. One of my favorite Buffett quotesis:

“Buy commodities, sell brands” has long been a formula for business success. It has produced enormous and sustained profits for Coca-Cola since 1886 and Wrigley since 1891. On a smaller scale, we have enjoyed good fortune with this approach at See’s Candy since we purchased it 40 years ago.

And how is this applicable to Duracell?

Consider for a moment in its ranking of the Best Global Brands in 2014, Interbrand estimated that the brand value of Duracell stood at $4.9 billion, ahead of MasterCard ($4.8 billion) and narrowly trailing both Chevrolet and Ralph Lauren.

Said differently, Buffett paid less for Duracell — the company — than what one company estimated its brand value alone is worth.

Also, it isn’t just the Duracell brand that is compelling, but its business, too. P&G noted in its annual report that Duracell maintains over 25% of the global battery market share. And Interbrand noted in its report on the company:

“Duracell continues to respond to consumer demands through innovation and new product launches. New technologies in rechargeable batteries, longer lasting energy storage times (Duralock) and synergies with wireless iPhone charging (PowerMat) demonstrate responsiveness to a changing marketplace. Duracell is working to further increase its presence by forging retailer-specific partnerships and nudging competitors out of view in the process.”

Clearly, the company isn’t afraid of innovation, and it is responding to changing demands and desires of consumers.

The charge to the bottom line

We don’t know the details of how Duracell will fit in the massive empire that Berkshire Hathaway has become. But there is one thing we do know — to the delight of Berkshire’s shareholders — all signs indicate that Buffett has once again found another wonderful business at a fair price.

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Patrick Morris owns shares of Berkshire Hathaway.

WASHINGTON, DC — After announcing disappointing third quarter 2014 results, Coca-Cola (NYSE: KO.US) saw its stock plummet by 6% on October 21, erasing nearly $10 billion of market value.

And just what caused the largest single day dip in its stock price in over six years for one of America’s most beloved beverage makers? As the Wall Street Journal reported:

Coke continues to flail around for a solution to the shrinking ranks of soda drinkers in the U.S., China, Brazil and elsewhere. Profit was down 14% in the quarter, volume targets were missed, and Coke lowered its long-term revenue target and warned it will miss its profit target — not only this year but next.

While it has clearly been one of the best investments over the last century — as Warren Buffett tells us, $40 invested in Coca-Cola when it went public in 1919 would be worth more than $10 million today — such disappointing results have caused many to wonder exactly what the future holds for one of the greatest icons of American business success.

All of this begs the question, will Coca-Cola be around 100 years from now?

The simple answer
While we’re all likely familiar with the disclaimer required by the SEC, “performance does not necessarily predict future results,” the simple answer is: absolutely.

But it isn’t just that Coca-Cola will be around 100 years from now, but all signs point to the fact it will likely continue to thrive.

Incredible expansion
Although this is an investing website, when considering what the next 100 years will look like for a company, a glance at its latest bottom line results won’t do much good. Instead we must step back and consider the bigger picture.

At its core, what exactly does Coca-Cola do? It sells drinks of course.

And just how well is it doing that? Consider that over the last decade, the number of Coca-Cola products consumed each day has risen by 600 million:

Said a little differently, 219 billion more 8 ounce servings of Coca-Cola products are being consumed each year. Or if you want to be even more specific, that amounts to nearly 7,000 additional drinks each second. To put that into perspective, when it was founded in 1886, just nine beverages were served each day. 

All of this is to say, Coca-Cola has been growing at an incredibly rapid pace over the last 128 years, and it has no sign of slowing down anytime soon.

Billion dollar brands
So how has Coca-Cola delivered such incredible results? Consider for a moment the words of Warren Buffett from his 2007 letter to shareholders:

A truly great business must have an enduring “moat” that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business “castle” that is earning high returns. Therefore a formidable barrier such as a company’s being the low- cost producer (GEICO, Costco) or possessing a powerful worldwide brand (Coca-Cola, Gillette, American Express) is essential for sustained success.

Or those from his 2011 letter:

“Buy commodities, sell brands” has long been a formula for business success. It has produced enormous and sustained profits for Coca-Cola since 1886 and Wrigley since 1891. On a smaller scale, we have enjoyed good fortune with this approach at See’s Candy since we purchased it 40 years ago.

With a value of nearly $82 billion, recognize Coca-Cola itself is the third most valuable brand in the world according to Interbrand. In addition, Sprite, a Coke product, has a brand value of $5.6 billion, placing it 72nd on the list, ahead of other well-known brands like Starbucks,Chevrolet, and Ralph Lauren. In total, of its 111 total brands, 17 have a value of over $1 billion. 

Source: The Motley Fool.

And it’s not just that its brands are valuable, but they are also beloved. At the time of writing, Coca-Cola has nearly 90 million Facebookfans, which is nearly twice as many at second and third place brands — Red Bull andMcDonalds — combined. 

Knowing one of the greatest investors of all time believes brand value is a key to success, there is much to like about the position Coca-Cola has placed itself — and its brands — in.

An eye toward the future
With its remarkable success and incredible brand power in mind, it must be noted that Coca-Cola has not been content to just rest on its laurels and believe success will simply come its way.

Knowing consumer habits and dynamics are changing, it has aggressively pursued equity stakes in companies like Green Mountain Keurig and Monster Beverage Corporation, and it now owns roughly 16% of each. In addition, it bought Glaceau — the company which makes Vitaminwater — for $4.1 billion in 2007.  

In many ways, Coca-Cola has taken a page out of the handbook of Buffett’s Berkshire Hathaway, as it has continually recognized its need to use the massive amount of cash it generates to make acquisitions that will in turn continue to deliver more and more value to shareholders.

Source: Coca-Cola

The key takeaway
Speaking of Buffett, at the end of last year, the 9.1% stake in Coca-Cola — which cost him $1.3 billion to accumulate between 1988 and 1994 — was worth a remarkable $16.5 billion.

And that is to say nothing of the countless amounts of cash Berkshire Hathaway has received in the form of dividends.

With that said, it’s no wonder why he has so happily heaped praise on Coca-Cola throughout the years.

But what does he think the next 100 years will hold for Coca-Cola?

In his own words from 2011:

Whether the currency a century from now is based on gold, seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola or some See’s peanut brittle. In the future the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce.

It’s no wonder he admitted he’d never sell a single one of his 400 million shares.

After all, he himself once said, “time is the friend of the wonderful business.”  

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Patrick Morris owns shares of Berkshire Hathaway and Coca-Cola. 

WASHINGTON, DC — The latest SEC filing from Warren Buffett’s Berkshire Hathaway listing the company’s stock holdings at the end of the third quarter was released last week, and the Oracle of Omaha has made some significant changes to his portfolio.

Last quarter, Berkshire Hathaway held stock in 42 companies worth approximately $89 billion — and, as of the most recent quarter, that number grew by about 3.5%, to $92 billion, with 43 companies, including one major addition. In fact, Buffett left his total share count of 33 of those companies identical — but he made major moves with others.

1. Added a $3.5 billion position in ExxonMobil (NYSE: XOM.US)

Warren Buffett’s biggest move of the quarter came in the form of a $3.5 billion investment in this energy giant. Buffett has long been a fan of large companies with a strong competitive advantage, and this is no exception, as Buffett now holds about 1% of the world’s second largest company.

The SEC filing does not say why Buffett added a stake in ExxonMobil, but the discipline and focus it adheres to when it comes to returning capital to shareholders is almost unparalleled. Considering it delivered another solid quarter of results in its most recent earnings release, it should come as no surprise that Buffett would want to invest in this stellar company.

2. Unloaded 75% of the GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) position

While Buffett had a “small” $73 million stake in the British pharmaceutical company at the end of the second quarter, he unloaded almost all of his holdings in the beleaguered market laggard during the third quarter. Considering that GlaxoSmithKline has been under a wealth of scrutiny lately as a result of allegations of bribery in China, and the patent expiring on its top-selling drug Advair, it may come as no surprise Berkshire Hathaway sold its position. While Berkshire didn’t have a major position in GlaxoSmithKline, he likely wasn’t thrilled with all the headaches associated with owning the company.

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> Patrick owns shares of Berkshire Hathaway and ExxonMobil. The Motley Fool has recommended shares in GlaxoSmithKline.