Powerful Brands Return Big Profits For Investors
Interesting piece today by TradingMarkets citing a correlation between the best brands in the market today returning big profits for investors. Investors that bought all 100 top brand stocks in 2000 would have realized a return of 31% versus a loss of 28% by the S&P 500.
For their research they used the America’s Top 100 Brands List from Business Week and InterBrand. What it really shows is that brand investing – something like Warren Buffett does very well – can and does work.
Provided below is a chart of the returns of the top 10 brands from the list and their returns since 2000:
The article makes several good points:
- “Brands perform well because companies tend to reinvest in those brands and deliver what their customers want.”
- “Even with their dramatic drops, consumers could have seen a higher return overall had they invested in ‘what they know.’”
- For any regular investor by taking advantage of the knowledge you already have you can make smarter investment decisions in your portfolio.
Now, playing devils advocate one big question arises, how were we supposed to know certain brands like Google or Apple with the ipod or Nintendo after the launch of the Wii were going to take off?
In reality there is no real way of knowing. But by simply staying in touch with what products or services are currently popular or that we utilize every day brands can and will begin to stand out amongst the crowds.
Bottom line, mark brands down as one key factor to tie into your investment decision making process.
Source:
How to Invest in the Brands You Know
Jennifer Openshaw, TradingMarkets
Yahoo Finance, February 24, 2009
