In business, one of the most valuable of all assets is not something you can touch or hold or taste, but you know it when you see it -- or, to be more precise, you know it when you feel it. I'm referring to brands, and good brands make an emotional connection with customers. A company's brand can be one of its most valuable assets, even its single-most valuable asset. A company can sell lots of products and make lots of money just on the basis of its brand.
I was just looking at a study called "Best Global Brands," published by Interbrand. (Just as the name suggests, it is a study of the most valuable brands.) Because good brands are powerful economic drivers, I decided to look at the companies with the top 10 brands to see if any pass muster with the guru strategies I use to analyze stocks. These are computerized strategies based on how well-known investors analyze stocks. Four of the top 10 companies with great brands earned high scores from at least one of the guru strategies. One strategy, which is based on the writings of James P. O'Shaughnessy, liked three of these.
The O'Shaughnessy strategy favored one of the most famous and valuable brands in the world -- Coca-Cola (KO - commentary - Trade Now). Interbrand values Coke's brand at $68.73 billion. (PepsiCo (PEP - commentary - Trade Now), by the way, was ranked twenty-third, with a brand worth $13.7 billion.) The O'Shaughnessy strategy likes Coke's large market cap of about $120 billion, strong cash flow per share at $3.22, sizable number of 2.3 billion shares outstanding and large $31 billion revenue base. The strategy's last step is selecting the 50 companies from those that have passed these four criteria and then looking for those with the highest dividend yield. Coke's yield is a bubbly 3.12%, earning it a high standing with the O'Shaughnessy strategy.
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At the time of publication, Reese was long Nokia, although holdings can change at any time.
John P. Reese is founder and CEO of Validea.com, an investment research firm, and Validea Capital Management, an asset management firm serving affluent investors and companies. He is also co-author of two investing books, including The Guru Investor: How to Beat the Market Using History's Best Investment Strategies (Wiley). Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Reese appreciates your feedback. Click here to send him an email.
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