TIME Companies

The Fascinating History of the Coca-Cola Bottle

Manufacture Of Coke Light Soft Drinks At The Coca-Cola Hellenic Plant In Cyprus
Bloomberg—Bloomberg via Getty Images Empty glass bottles of Coca-Cola Light, also known as diet Coke, travel along a conveyor belt ahead of filling at the Lanitis Bros Ltd. bottling plant, part of the Coca-Cola Hellenic Group, in Nicosia, Cyprus, on Tuesday, June 10, 2014.

The anniversary comes at a difficult time for the soda maker

Coca-Cola is making a lot of the 100th anniversary of its iconic bottle. Given what’s happening with soda sales generally, and Coke sales in particular, the festivities come at a delicate time.

The celebration of the bottle includes an ad campaign in more than 100 countries featuring Elvis Presley, Marilyn Monroe, and Ray Charles, and an exhibit at the High Museum of Art in Atlanta called “The Coca-Cola Bottle: An American Icon at 100.” The exhibit will include “more than 100 objects, including more than 15 works of art by Andy Warhol and more than 40 photographs inspired by or featuring the bottle,” the company said in a statement.

Warhol, of course, was pilloried for his seeming embrace of consumerism though works like the Campbell Soup Cans and Coke Bottles, though of course it wasn’t that simple. The result was that the counterculture had infiltrated consumer culture, and vice versa. Warhol, who saw consumer products as having a leveling effect, said this about Coke:

What’s great about this country is that America started the tradition where the richest consumers buy essentially the same things as the poorest. You can be watching TV and see Coca-Cola, and you know that the President drinks Coke, Liz Taylor drinks Coke, and just think, you can drink Coke, too. A Coke is a Coke and no amount of money can get you a better Coke than the one the bum on the corner is drinking. All the Cokes are the same and all the Cokes are good. Liz Taylor knows it, the President knows it, the bum knows it, and you know it.

The original bottle was designed by the Root Glass Company in Indiana, nearly 30 years after the product was launched in 1886. Root won a contest where participants were challenged to “develop a container recognizable even if broken on the ground or touched in the dark.” Root’s design allowed consumers to recognize the product “even if they felt it in the dark,” according to Coke.

The celebration comes during a rough period for Coke. It has implemented a massive cost-cutting campaign. Its quarterly profits were down by 55%, it reported earlier this month. Meanwhile, sales of sugary soft drinks in general are plunging, having dropped by more than 20% between 2004 and 2014. In an effort to capitalize on consumers’ move away from sugar and toward protein, Coke has introduced Fairlife milk products. The bottles are pretty cool, but one can wonder if anybody will be celebrating them 100 years from now.

MONEY Warren Buffett

Warren Buffett’s Secret to Staying Young: 5 Cokes a Day

150226_INV_WarrenBuffettCoke
Daniel Acker—Bloomberg via Getty Images Warren Buffett, chief executive officer of Berkshire Hathaway, drinks a Cherry Coca-Cola.

The world’s most successful investor stays youthful by eating "like a 6-year-old." Turns out, the Berkshire Hathaway CEO’s bizarre diet is highly strategic.

How does the world’s top investor, at 84 years old, wake up every day and face the world with boundless energy?

“I’m one quarter Coca-Cola,” Warren Buffett says.

When he told me this in a phone call yesterday (we were talking about the death of his friend, former Coca-Cola president Don Keough), I assumed he was talking about his stock portfolio.

No, Buffett explained, “If I eat 2700 calories a day, a quarter of that is Coca-Cola. I drink at least five 12-ounce servings. I do it everyday.”

Perhaps only a man who owns $16 billion in Coca-Cola KO 0.71% stock—9% of Coke, through his company, Berkshire Hathaway BRK.A -0.23% —would maintain such an odd daily diet. One 12-ounce can of Coke contains 140 calories. Typically, Buffett says, “I have three Cokes during the day and two at night.”

When he’s at his desk at Berkshire Hathaway headquarters in Omaha, he drinks regular Coke; at home, he treats himself to Cherry Coke.

“I’ll have one at breakfast,” he explains, noting that he loves to drink Coke with potato sticks. What brand of potato sticks? “I have a can right here,” he says. “U-T-Z” Utz is a Hanover, Pennsylvania-based snack maker. Buffett says that he’s talked to Utz management about potentially buying the company.

Investors in Berkshire Hathaway may feel relieved that the CEO isn’t addicted to Utz Potato Stix at every breakfast. “This morning, I had a bowl of chocolate chip ice cream,” Buffett says.

Asked to explain the high-sugar, high-salt diet that has somehow enabled him to remain seemingly healthy, Buffett replies: “I checked the actuarial tables, and the lowest death rate is among six-year-olds. So I decided to eat like a six-year-old.” The octogenarian adds, “It’s the safest course I can take.”

This article originally appeared on Fortune.com.

MONEY Tech

The Real Threat to Twitter’s Bottom Line

Twitter headquarters in San Francisco, California.
David Paul Morris—Bloomberg via Getty Images

Twitter will lose users and advertisers if it doesn't start addressing abuse, harassment and trolls.

If you have a Twitter TWITTER INC. TWTR -0.71% account, you probably know the inherent value of the microblogging service. As far as social media sites go, there’s quite possibly no better distribution outlet for news — essentially Twitter sets the national conversation and zeitgeist.Facebook has tried to copy Twitter’s value proposition with its trending feature, but still trails in this regard.

That said, Twitter has a rather big problem it needs to address: abuse and harassment. Even CEO Dick Costolo acknowledges the issue; in a leaked memo to staff, Costolo wrote that “[W]e suck at dealing with abuse and trolls on the platform and we’ve sucked at it for years.” For a small snippet of Twitter’s not-so-great hits, consider the following:

  • After the suicide of her father, comedian Robin Williams, Zelda Williams briefly deleted her Twitter account from her devices after suffering sustained harassment and abusive comments.
  • After posting videos critical of gaming culture’s treatment of women, Anita Sarkeesian received death threats. That is not unheard-of with Twitter, but the threats were so specific they included her home address.
  • After poor reporting by Rolling Stone and a shifting victim’s story regarding an alleged rape at the University of Virginia, user Charles Johnson proudly leaked to Twitter a picture and previously undisclosed full name of the alleged victim.

Just peruse the retweets and quoted tweets of news organizations and you’ll probably feel a sense of displeasure over the angry discourse that’s gripped Twitter — even worse if the tweet mentions President Barack Obama, House Speaker John Boehner, House Minority Leader Nancy Pelosi, or Senate Majority Leader Mitch McConnell. And while a certain level of anger is to be expected on the Internet, hate-filled, sexist, and racist comments are normal in Twitter feeds.

For many users, Twitter’s value proposition is overshadowed by the coarse and angry dialogue that is commonplace on the site. That’s a serious problem for marketers and, eventually, Twitter investors.

Coke’s “Make it Happy” campaign should scare Twitter investors

Twitter investors might think this isn’t a big issue. As an ad-based model all you care about is growing users, timeline views, and monetization metrics. And on a revenue (up 97% year over year) and adjusted earnings (up 500%) basis, Twitter just reported a fantastic quarter. That said, the failure of Coca-Cola’s “Make it Happy” campaign should give investors a reason to pause.

For those not following the story, Coca-Cola rolled out an ambitious campaign that used television and social media to connect to consumers. Ironically, the campaign centered on making the Internet a happier place. Coke put lots of advertising dollars to work by buying a Super Bowl ad. The Twitter component consisted of users tweeting negative comments to #MakeItHappy, and Coke would turn the words into cute ASCII images via automated response.

Unfortunately, Godwin’s Law was achieved for brand marketing. Coke was duped into tweeting passages from Adolf Hitler’s Mein Kampf initially and soon gossip site Gawker got in on the action by providing more passages for conversion. While #MeinCoke trended just briefly, you can expect Coca-Cola is now looking at Twitter’s value proposition differently. Coke should have known better, as there is a long history of Twitter marketing campaigns and accounts going horribly awry — Google Chipotle hacked + Nazi for an even worse example.

Even scarier for advertisers, nobody seems intent on fixing the problem

The worst part for advertisers and brands is that, outside of Twitter’s lip service and modest reforms, nobody seems to care about fixing the problem. Even news organizations, the supposed pinnacle of restraint and balance, seem to err on the side of salaciousness in their Twitter feeds. Twitter is quickly becoming known as a rage curator, career/brand destroyer, and gaffe producer rather than as a viable marketing platform. In the end, there’s only so long companies will pay to advertise to an unruly mob.

Costolo commented in his memo that “We lose core user after core user by not addressing simple trolling issues that they face every day.” At some point the CEO might have to say the same about advertisers, his true customers.

TIME Brands

Coca-Cola Is About to Start Selling a New Protein-Packed Milk

In this Friday, Jan. 23, 2015 photo, Fairlife milk products are on display in an Indianapolis grocery store.
Michael Conroy—AP In this Friday, Jan. 23, 2015 photo, Fairlife milk products are on display in an Indianapolis grocery store.

It's lactose-free and packed with 50% more protein than regular milk

Coca-Cola announced plans Tuesday to distribute a premium protein-packed milk under Minute Maid’s Fairlife brand across the U.S. next month.

The lactose-free milk will contain half the sugar of regular milk, 50% additional protein and 30% greater calcium, reports USA Today. Customers will be able to choose among whole milk, fat-free, chocolate and reduced-fat options with prices ranging from $3.98 to $4.20.

“I hope it’s Coke’s next billion-dollar brand,” said Fairlife CEO Steve Jones.

Coca-Cola’s decision to increase the milk’s protein content corresponds with an increased demand for protein among consumers. Data shows 71% of shoppers seek more protein in their diet, according to findings from market-research firm NPD Group.

Coca-Cola is hoping its premium milk will help boost sales, as fresh or pasteurized milk retail volume sales declined by 3% last year. Sales of carbonated beverages are also falling.

[USA Today]

TIME photography

See Photos of Vintage Coca-Cola Signs from New York City to Bangkok

On January 31, 1893, Coca-Cola became a registered trademark, launching what would come to be one of the most recognized brands in the world

In 1891, Asa Candler bought a company for $2,300. That price tag in today’s dollars is closer to $60,000, but still, not a bad deal for a business that would gross a profit of more than $30 billion in 2014. During the early years, Candler focused his efforts on building his brand, offering coupons for free samples and distributing tchotchkes with the company’s logo on them. The aggressive marketing paid off. By 1895, a glass of Coca-Cola could be found in every state in America.

By the time Henry Luce purchased LIFE Magazine in 1936, Coca-Cola was just years away from producing its billionth gallon of its trademark soda syrup. The pages of LIFE bubble with Coke ads, the first one appearing in 1937, and many issues included multiple invitations to “add zest to the hour” and take “the pause that refreshes.”

But LIFE was not only a purchaser of Coca-Cola advertising. LIFE’s photographers were also capturing the growing ubiquity of that Spencerian Script—the looping, cursive font of Coke’s logo—in places as far-reaching as Bangkok and the Autobahn. During the 1930s, the company had begun to set up bottling plants in other countries. But when General Eisenhower sent an urgent cable from North Africa in 1943, requesting that Coca-Cola establish more overseas bottling plants in order to boost soldiers’ morale, the wheels were set in motion for rapid international expansion. Wartime saw the addition of 64 foreign plants to the existing 44, and post-war growth continued steadily.

The photos here depict not just the way Coke began to blend into international surroundings—by the late 1960s, half of the company’s profits would come from foreign outposts—but also the wide array of American locales and subcultures the brand was penetrating. Led by company president Robert Woodruff, whose term began in 1923, Coca-Cola’s vigorous marketing efforts found footholds for the brand from segregated country stores to New York City’s Columbus Circle to roadside stands in Puerto Rico.

Of the dozens of slogans Coca-Cola has had over the years, the one it debuted in 1945 was certainly aligned with the global domination the company had set its sights on. “Passport to refreshment” was not just a clever pun, but a sign of things to come.

Liz Ronk, who edited this gallery, is the Photo Editor for LIFE.com. Follow her on Twitter at @LizabethRonk.

MONEY Food & Drink

How Coke Convinced Us to Pay More … for Less Soda

A 7.5-ounce can of Coca-cola, right, is posed next to a 12-ounce can for comparison.
Matt Rourke—AP A 7.5-ounce can of Coca-Cola, right, is posed next to its big brother, the traditional 12-ouncer.

Talk about a brilliant sales concept!

Soda sales may be in a slump, but one sliver of the soft drink market—the segment that comes in smaller than usual sizes, including those adorably tiny 7.5-ounce cans—is booming. What’s especially curious about the trend is that sales have been taking off even though the smaller packages offer far worse value to consumers.

This week, the Associated Press explored this odd scenario, in which consumers are clamoring to buy Coke, Pepsi, and other sodas in unconventionally smaller sized packaging, notably the 7.5-ounce mini can that’s generally sold in eight-packs in stores.

Previously, the Wall Street Journal reported that sales of smaller Coca-Cola packages—including the mini cans, as well as 8-ounce glass bottles and 1.25-liter plastic bottles—were up 9% through the first 10 months of 2014. During the same time period, sales of regular old 12-ounce cans and 2-liter bottles were as flat as a bottle of week-old Coke.

Beyond their nontraditional size, what all of the smaller soda items have in common is that they’re “premium-priced packages.” Yes, the value proposition in the trendy category is that you not only get less product, but you get to pay more for the privilege. Coca-Cola estimates that consumers typically pay 31¢ for each traditional 12-ounce Coke purchased in a 12- or 24-pack at the supermarket. By contrast, the average price per 7.5-ounce mini can breaks down to 40¢ a pop.

And remember, you’re getting a lot less soda in the smaller cans. Tally up all of the soda in one of these eight-packs and it comes to 60 ounces, which is slightly less than the contents of one Double Gulp before 7-Eleven downsized it from 64 ounces to a mere 50. On a per-ounce basis, consumers are effectively paying double for the smaller packages: 5.3¢ per ounce for Coke in mini cans, versus 2.6¢ per ounce for the same beverage in 12-ounce cans.

What explains consumers’ willingness to pay more for less soda? One explanation is that the mini cans are simply “freaking adorable,” as one source put it when speaking to the AP. She’s not the only one to think so. Last year, a marketing campaign deposited adorable mini kiosks—complete with adorable waist-high Coke vending machines selling adorable mini Cokes—in five German cities. Here’s a look:

The result of this experiment, in addition to enough adorableness to make your head explode, was sales that were anything but small. Ogilvy & Mather Berlin, the firm behind the campaign, said that the kiosks averaged 380 cans sold daily, 278% higher than your typical Coke machine.

Mini sodas aren’t selling like crazy just because they’re cute, however. As we’ve pointed out before, consumers are attracted to small sodas—and beer—because they come with fewer calories than the regular sizes. The great (or sad) irony is that research shows that consumers tend to buy (and drink) far more sugary drinks when they’re purchased in smaller packages. Therefore, whatever health benefits may have been gained via the small size is likely outweighed by the fact that you’re consuming as many or more ounces of soda overall.

In other words, as nonsensical as it seems, it may be healthier for you to buy soda in larger sizes. It’s certainly better for your wallet.

Read next: The Soda Industry’s Promises Mean Nothing

Listen to the most important stories of the day.

TIME movies

Geena Davis Launches Film Festival to Boost Female Filmmakers, With Help From Natalie Portman and Shailene Woodley

National Women's History Museum's 3rd Annual Women Making History Event
Gregg DeGuire—WireImage Actress Geena Davis arrives at the National Women's History Museum's 3rd Annual Women Making History event at Skirball Cultural Center on Aug. 23, 2014 in Los Angeles.

Award winners will get guaranteed theatrical release

Geena Davis is starting the Bentonville Film Festival, a festival designed to promote women and minority filmmakers that will be the only competition in the world to guarantee theatrical distribution for the winners.

The BFF is being co-hosted by WalMart, AMC, Coca-Cola, and ARC Entertainment, and the advisory board contains big names like Natalie Portman, Julianne Moore, Angela Bassett, Samuel L. Jackson, and Shailene Woodley. The festival will screen about 75 films in competition, and the films that win the Audience, Jury Selection and Best Family Film Awards will get a distribution agreement with a guaranteed theatrical release in at least 25 AMC theaters.

“I have been an advocate for women for most of my adult life,” Geena Davis said in a statement. “The Bentonville Film Festival is a critical component of how we can directly impact the quantity and quality of females and minorities on screen and behind-the scenes.”

Submissions will be accepted starting Jan 15, and the selected films will be announced in March.

MONEY Warren Buffett

The Surprising Lessons Warren Buffett Learned from a Candy Company

Berkshire Hathaway's Warren Buffett at the See's Candies booth Saturday, May 3, 2014, at the Berkshire Hathaway Annual Shareholder's Meeting, in Omaha, Neb.
Dave Weaver—Invision for See's Berkshire Hathaway's Warren Buffett at the See's Candies booth Saturday, May 3, 2014, at the Berkshire Hathaway Annual Shareholder's Meeting, in Omaha, Neb.

Instead of seeking great bargains, Buffett learned to find great businesses.

Warren Buffett’s success in business is well chronicled and nearly unparalleled. But you may not know he attributes a healthy dose of his success to a candy shop in California you may never have heard of.

The history

In 1972 See’s Candies was purchased for $25 million by Buffett and longtime Berkshire Hathaway lieutenant Charlie Munger through Blue Chip Stamps, a business controlled by Buffett and Munger.

Although Blue Chip Stamps has faded into obscurity as Americans stopped buying stamps, Buffett has gone on to say that See’s Candies is actually his “dream business.”

So what has made See’s so successful? First, although it hasn’t been a world-beater in growing its sales, it has been incredibly profitable and a cash-generating machine. From 1972-2011 it contributed a staggering $1.65 billion to the bottom line of Berkshire.

Knowing it brings in roughly $85 million annually in pre-tax profits, there will soon come a day when the total contribution of See’s to Berkshire will top $2 billion. And what has Berkshire done with all that cash?

In 2007 Buffett answered that very question by revealing, “After paying corporate taxes on the profits, we have used the rest to buy other attractive businesses.”

Undoubtedly Buffett is thankful for the financial contribution See’s has made to Berkshire.

But it turns out through See’s Candies, he learned something even greater.

The gratitude

Buffett was very much an avid devotee of the value-investment philosophy predicated in the teaching of his former professor, boss, and mentor, Benjamin Graham. Graham spoke to the inefficiencies rooted in financial markets, and how there were always bargains to be had that Wall Street overlooked.

But thanks to his friendship with Munger, Buffett’s mind-set on investing began to shift. Instead of seeking great bargains, Munger continued to tell Buffett about to the need to find great businesses. A 1988 article in Fortune Magazine notes:

So in conversations with Buffett over the years [Munger] preached the virtues of good businesses, and in time Buffett totally accepted the logic of the case. By 1972, Blue Chip Stamps, a Berkshire affiliate that has since been merged into the parent, was paying three times book value to buy See’s Candies, and the good-business era was launched. ”I have been shaped tremendously by Charlie,” says Buffett. ”Boy, if I had listened only to Ben, would I ever be a lot poorer.”

Graham’s teaching doesn’t run contrary to this — he said, “Investment is most intelligent when it is most businesslike” — but it also wasn’t the principle focus. And through Munger and the resulting acquisition of See’s Candies, this insight was all the more affirmed.

When asked about See’s Candies at the Berkshire Hathaway Annual Meeting this year, both Warren and Munger chimed in on how grateful they were for buying it more than 40 years ago:

Buffett: “See’s has provided us with lots of cash for acquisitions and opened my eyes to the power of brands. We made a lot in Coca-Cola partly because of See’s. There’s something about owning one [brand] to educate yourself about things you might do in the future. I wouldn’t be at all surprised that if we hadn’t owned See’s, we wouldn’t have bought Coca-Cola.”

Munger: “There’s no question about the fact that See’s main contribution to Berkshire was ignorance removal. One of the benefits of removing our ignorance is that we grew into what we are today. At the beginning, we knew nothing. We were stupid. If there’s any secret to Berkshire, it’s that we’re pretty good at ignorance removal.”

The 400 million shares of Coca-Cola Berkshire now owns cost $1.3 billion to acquire between 1988-1994, but at the end of September they were worth a remarkable $17.1 billion. And that is to say nothing of the billions worth of dividends Berkshire received over the last two and a half decades.

Buffett openly admits none of that would’ve likely been available to Berkshire (and its shareholders) were it not for See’s Candies. As a result, it is clear the benefit of See’s extends well beyond the $2 billion contribution it has made to the bottom line.

What this reveals

Examples like this show us how we must always seek to learn from things both great and small, and give great credence to the Proverb “Let the wise hear and increase in learning.”

Few would guess a small candy shop would’ve taught Buffett so much.

Above all, this story reminds us to always be thankful of those things great and small, because we never know where they shall lead us.

MONEY consumer psychology

7 Internet Memes That Are Better Than Advertising

If any press is good press, then these brands really lucked out by association with memes that turned their products—or sales staff—into clickbait.

If there’s any lesson to be learned from the IKEA monkey, it’s that the Internet can make stars out of cute creatures in stores. And this past weekend proved it all over again, when “Alex from Target” took over the hearts and Twitter feeds of teenage girls worldwide:

After this photo inspired countless memes, a rumor circulated that the whole thing was just a marketing stunt—though that theory was quickly debunked, with Target spokespeople stating they were “as surprised as anyone” by Alex’s fame. But that didn’t keep them, of course, from getting in on the action: Pleased with all the attention, the store tweeted an approving “We heart Alex, too!”

Alex, who is enjoying his new-found fame (and perhaps waiting for his own web game to drop), is hardly the only example of the Internet giving a free gift to brand managers and advertisers.

Here are 6 other brands that went viral.

1. Chevrolet

Last week, a Chevrolet regional zone manager named Rikk Wilde nervously botched a televised speech while presenting World Series MVP Madison Bumgarner with a new Chevy truck. The company took ownership of the resulting viral video by turning Wilde’s most embarrassing line — “It combines class-winning and leading, um, you know, technology and stuff” — into a hashtag.

2. Poland Spring

Florida Senator Marco Rubio unintentionally filmed a compelling bottled water ad when he got a dry mouth during the Republican response to the 2013 State of the Union address—and awkwardly grabbed and gulped from a Poland Spring bottle placed off-camera.

3. McDonald’s

When Iowa science teacher John Cisna ate nothing but McDonald’s food for 3 months (and—crucially—exercised every day), he lost 37 pounds. His experiment, originally designed to teach his students the importance of making smart choices when presented with any menu, led to a supersized Twitter following, book deal, and paid gig speaking to McDonald’s franchisee and employee groups. Cisna even kept the experiment going past the 3-month mark:

4. PBS

You might remember when then-presidential candidate Mitt Romney raised hackles during a 2012 debate by saying to debate moderator Jim Lehrer: “I’m going to stop the subsidy to PBS. I’m going to stop other things. I like PBS. I love Big Bird. I actually like you too. But I’m not going to — I’m not going to keep on spending money on things to borrow money from China to pay for it.” As a result, at least some public broadcast stations saw a spike in donations, thanks to a “save Big Bird” campaign.

5. Diet Coke and Mentos

A favorite of science teachers and YouTube daredevils alike, this famous viral challenge gives anyone who enjoys harmless explosions an incentive to buy Coke and Mentos. Though the reaction technically doesn’t require Diet Coke—just carbonated water—the aspartame in diet soda apparently makes the reaction most powerful.

6. Chipotle

This video, featuring an adorable child professing love for the purveyor of pico de gallo, speaks for itself. So far, more than 2 million people have viewed it.

Now learn more about Alex from Target and check out some examples of videos that brand managers wish you had never seen:

 

MONEY stocks

How to See the Stock Market Like Warren Buffett Does

Warren Buffett, chief executive officer of Berkshire Hathaway Inc.
Jeff Kowalsky—Bloomberg via Getty Images

Ultimately, intelligent investors mustn't view stocks as numbers on screens or charts moving up and down, but as businesses.

When I say “stock,” what comes to mind?

If it’s one that you own, do you think of a chart that is hopefully moving upwards? If it’s one you’re thinking about owning, do you think about how a few important numbers and metrics stack up against those of its peers?

One of the greatest investors of all time — the one and only Warren Buffett — looks at stocks in a way that is easy to understand yet incredibly hard to manage. But his strategy is one we should all remember when we think about the stocks we own and the ones we’re thinking about investing in.

The simple wisdom

When Buffett discusses the progress of Berkshire Hathaway’s four biggest individual stock holdings — Wells Fargo, Coca-Cola, American Express, and IBM — in his latest annual letter to shareholders, at no point does he mention their price.

Instead, he speaks of two critical things: Berkshire’s ownership stake in the companies themselves and how much of their bottom-line earnings are actually available to Berkshire because of that stake.

Berkshire Hathaway’s ownership of each of the big four has grown over the last few years thanks to its purchase of larger positions in Wells Fargo and IBM plus the share repurchase efforts of the management teams at Coca-Cola and American Express.

youll-never-see-your-stocks-the-same-way-again-1_large

Although those slight increases in ownership may not raise any eyebrows, dominate headlines, or even inspire a Tweet, consider Buffett’s own words:

If you think tenths of a percent aren’t important, ponder this math: For the four companies in aggregate, each increase of one-tenth of a percent in our share of their equity raises Berkshire’s share of their annual earnings by $50 million.

And that brings us to our second point: It isn’t just the ownership stake that matters, but the actual results of the company that is owned. Buffett went on to say:

The four companies possess excellent businesses and are run by managers who are both talented and shareholder-oriented. At Berkshire, we much prefer owning a non-controlling but substantial portion of a wonderful company to owning 100% of a so-so business; it’s better to have a partial interest in the Hope diamond than to own all of a rhinestone.

As a result of both increased ownership and the continued success of Buffett’s “Big Four,” the portion of earnings available to Berkshire — although only the dividends paid out show up on its financial statements — has grown dramatically since 2011:

youll-never-see-your-stocks-the-same-way-again-2_large

But this growth is nothing new. In his 2011 letter to shareholders, Buffett said:

We expect the combined earnings of the four — and their dividends as well — to increase in 2012 and, for that matter, almost every year for a long time to come. A decade from now, our current holdings of the four companies might well account for earnings of $7 billion, of which $2 billion in dividends would come to us.

And while the earnings growth of the Big Four may not continue at its recent pace of more than 15% annually, $7 billion may even be a dramatic understatement.

The key takeaway

As Buffett’s famed mentor Benjamin Graham said in his seminal book The Intelligent Investor: “Investment is most intelligent when it is most businesslike.”

Ultimately, intelligent investors mustn’t view stocks as numbers on screens or charts moving up and down, but as businesses. We must largely ignore movements in stock prices and evaluate the fundamental business dynamics, knowing that over time stock prices will reflect changes in underlying fundamentals and the results of the business.

For example, since Chipotle CHIPOTLE MEXICAN GRILL INC. CMG 0.06% went public on Jan. 26, 2006, its stock has moved up or down by 5% roughly once every four weeks, or 132 times. But those investors who have patiently waited, ignoring the price gyrations and trusting in the company’s hugely successful business, would have seen a $1,000 investment grow to nearly $14,000 at the time of writing.

Examples like this show why Buffett once remarked, “The stock market is designed to transfer money from the active to the patient.”

Does this mean you should simply pour money into great businesses? No, because, as Buffett has also said, “A business with terrific economics can be a bad investment if the price paid is excessive.”

But we must see that whenever we make an investment, we must always consider it part-ownership in a company, not simply a stock. Buffett does, and so should you and I.

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