Why Brand Matters

By Danny Vena - June 1, 2012 | Tickers: AAPL, GOOG, MCD, NKE, WMT | 0 Comments

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Quick – name the most popular and recognized brands you can think of.  Come up with a few.  I’ll wait.  OK, now are you invested in any them?  If not, you may be doing your portfolio and your returns a disservice. 

For many, being an investor over the years has been like treading water.  If you invested in the S&P 500 between 2000 and 2010 your returns would have been negligible, leading to the period being referred to as The Lost Decade in the financial press.  The individual investor, the thinking goes, would likely have made no headway during the period. 

This did not hold true, however, for those holding some of the world’s most recognized brands. 

A recent report of the Brandz Top 100 Most Valuable Brands 2012 indicates that if you were invested in the 100 most valuable brands as a portfolio over the last six years, you would have seen returns of 37.5% vs. a return of .4% for the S&P 500. 

If you were like me or members of my family, when asked the question concerning the most popular brands, you may have come up some of the same brands I highlight below.  Since these had the mindshare at our home, I used them as examples.  Try this at your house.  See what your family or friends come up with. 

Apple (NASDAQ: AAPL) has become nearly ubiquitous since their introduction of the iPod in 2001.  They have become a global technology powerhouse and have become the most recognized brand in the world.  The Apple ecosystem, including the iPod, iPhone, iPad and Mac computers has revolutionized the way people interact with technology. 

McDonald’s (NYSE: MCD) has long been the most recognized name in fast food in the United States and currently operates in 119 countries.  In response to changing consumer tastes, they have revised their menu to include healthier items.  They have now become the most valuable brand in fast food in the world and the 4^th most valuable brand overall. 

Google (NASDAQ: GOOG) has gone beyond being a globally recognized brand – they have become a verb.  Their web search engine and website Google.com is the most visited website on the planet.  They are the 3^rd most valuable technology brand and the 3^rd most valuable brand world-wide. 

Nike (NYSE: NKE) and their iconic “Swoosh” have become known the world over as a purveyor of athletic shoes and apparel.  Nike has the most valuable brand in apparel and 44^th most valuable brand overall. 

Wal-Mart (NYSE: WMT) has come from humble beginnings as the discount retailer on the outskirts of town to the largest private employer and largest retailer in the world.  They are the most valuable retail brand and the 17^th most valuable brand overall.

This table shows how our random selection of brand name stocks performed over the last six years.

This unscientific example shows some of the most recognized brands at our house.  Our answers six years ago would likely have been different and may have provided different results.  Your answers will likely be different as well.  However, this exercise goes a long way to validating the theory that when it comes in investing, brand matters.

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