7 Big Brands, 7 Big Stocks

MINNEAPOLIS ( Stockpickr) -- They have some of the most recognizable brands in the market, and as a result, their companies have become big revenue and profit generators. The two go hand in hand, but does that mean stocks of companies with big brands are moneymakers for investors?

In the market, making money for a company and making money for an investor are two different things. If the stock of a company with a well-known brand has already been fully priced, buying that investment today may not be such a smart thing.

Then again, if the stock of a big-brand company lags the market and is not priced at fair value, investors may want to consider that stock for their portfolio.

Related: Stocks to Lead the Market in 2011

It's up to the individual investor to determine if there is opportunity in owning the stocks of some of the biggest brands in the market. With that in mind, let's take a look at some of these names to see if their stocks are as big as their brands.

Coca-Cola's ( KO)

The Brand: Say the name "Coca-Cola" and you immediately picture the ubiquitous bottle. The brand is known around the world. Some even use the word "Coke" as a general reference to soft drinks, regardless of brand. It would take billions of dollars to replicate the value of Coca-Cola in the marketplace. Is that value recognized in the stock?

The stock: Shares trade for 20 times trailing earnings but only 17 times forward earnings. Coca-Cola market capitalization is approximately $150 billion. The company generates huge amounts of cash and pays investors a dividend of 2.7%. Add it all up and investors at today's prices are likely to do very well owning Coke the stock.

Major holders of Coca-Cola include Warren Buffett -- it's his top holding, comprising 24% of his total portfolio as of the most recent reporting period -- and the Children's Investment Fund. According to Andrea Tse, Coke was one of the top consumer stocks of 2010, and Jake Lynch highlighted it as one of the 10 best Dow dividend stocks for 2011. With an A- buy rating, its one of TheStreet Ratings' top-rated beverage stocks.

Campbell Soup ( CPB)

The Brand: Andy Warhol immortalized Campbell Soup with his artistic renditions of its soup cans, helping to further propel Campbell Soup to the head of its class and solidifying the brand in the American lexicon. It's hard to think of soup without picturing the simple red and white cans.

The Stock: Shares of Campbell Soup fell on hard times in December after reporting disappointing earnings. Investors in defensive stocks such as Campbell's expect consistency and do not like surprises. In that way, the miss was striking. The reduction in future guidance creates a new reality for investors, but it's not one to fret over. With a dividend of 3.3%, Campbell's is still a stock to own.

As of the most recent reporting period, Campbell Soup was one of the top holdings of Mason Hawkins at Southeastern Asset Management. Recently, Campbell made a list of stocks with large insider selling when insiders at the company dumped 2.4 million shares, or $84 million worth of stock.

American Express ( AXP)

The Brand: "Don't leave home without it." American Express' blue credit card with its simple block lettering has become a statement with consumers. Owning the card is thought to be a measure of success. That sort of brand identity is the jackpot for any company attempting to stand out in a crowded field. Mission accomplished for American Express.

The Stock: The near-collapse of the financial world in 2008 threatened to destroy American Express' brand equity. Anything having to do with debt or credit suddenly was frowned upon by consumers and investors alike. The carnage from bad debts and underwriting losses in the real estate market resulted in American Express' losing approximately 90% of its value. But the company has since repaired its balance sheet, and its credit products are back in business. Shares are still cheap, with a valuation of just over 10 times forward earnings. Getting a brand this big for this cheap makes American Express a no-brainer.

American Express is a top holding of Legg Mason's Bill Miller, comprising 2.1% of the total portfolio, and of T. Rowe Price's Brian Rogers, at 2.3% of the total portfolio. The stock was recently highlighted as one of Warren Buffett's 10 best investments for 2011 and as one of 11 inflation-proof financial stocks. With a B- buy rating, American Express is one of TheStreet Ratings' top-rated consumer finance stocks.

Tiffany ( TIF)

The Brand: In 1961, Truman Capote's novel Breakfast at Tiffany's was made into a film. 50 years later, women across the country are still dreaming of love and Tiffany-engraved engagement rings. Along the way, Tiffany, founded in the mid-1800s, has become a brand that is revered around the globe and known for luxury. If you see that baby blue box -- it's actually Tiffany Blue, a trademarked color -- you have a pretty good idea what's inside.

The Stock: Tiffany has become a global brand. That global growth potential is what makes its stock attractive to investors. Despite the recession, Tiffany has barely missed a beat. Its shares trade higher today than at the start of the recession in late 2007. Shares trade for 25 times trailing earnings and 20 times forward estimates. Analysts expect Tiffany to post a profit of $2.78 in the year ending January 2011 and $3.18 in the following year. Investors, then, are paying a fairly hefty premium for that 14% earnings growth. I may be willing to pay a premium for the Tiffany brand, but I would not pay a premium for the stock.

Tiffany bulls include John Rogers at Ariel Capital Management, who has a 2.1% stake in the stock as of the most recent period. Recently, Jim Cramer said Tiffany was one of several U.S. stocks with the most to gain from China, and Jonas Elmerraji highlighted it as a retail stock that could rally in 2011. With a B buy rating, Tiffany is one of TheStreet Ratings' top-rated specialty retail stocks.

KFC: Yum! Brands ( YUM)

The Brand: Is Kentucky Fried Chicken Colonel Sanders or is Colonel Sanders Kentucky Fried Chicken? I guess it really doesn't matter. If you are thinking about fried chicken, KFC and founder Colonel Sanders, whose image is the KFC logo, come to mind. Thanks to both, the brand has taken the Southern American taste of fried chicken global.

The Stock: Kentucky Fried Chicken is owned by consumer brand stalwart Yum! Brands. Thanks to a recovering consumer and the popularity of brands such as Kentucky Fried Chicken, Taco Bell and Pizza Hut, shares of Yum! are up almost 50% this year. The gains make the stock a bit pricey, trading for 22 times trailing earnings and 18 times forward earnings. The company also pays a 2% dividend. As the unemployment picture improves, the consumer will only gain strength, giving Yum! more room to run. I'm fine with paying a small premium here based on future prospects for further impressive growth.

Yum! is a top holding of Lone Pine Captial, which has a 6.1% stake in the stock as of the most recent reporting period, and Karen Finerman, with a 2.1% position. It was one of three defensive stock picks for 2011 from Oliver Pursche, co-portfolio manager of the GMG Defensive Beta Fund, as well as one of the 10 restaurant stock winners of 2010. With a B+ buy rating, Yum! is one of TheStreet Ratings' top-rated restaurant and hotel stocks.

Disney ( DIS)

The Brand: What child or family is not familiar with the Magic Kingdom and Mickey Mouse? Selling dreams and imagination, the company has built its reputation as a family-friendly brand that keeps customers smiling and coming back for more -- whether its for the company's ever-popular movies, its toys and other products, or its theme parks.

The Stock: Disney is an entertainment conglomerate whose properties are struggling to grow. Intense competition for discretionary dollars makes the going tough. Disney shares have done OK, rising more than 10% in 2010, but if you are looking for a stock as big as its brand, you might want to look elsewhere. The growth story at Disney appears to have stalled, making the stock somewhat of a dud over the last decade. I expect more of the same in the future and would therefore avoid Disney.

Tom Gayner recently reported a 2.9% stake in Disney, and Arnold Van Den Berg reported a 3% position. It was included in lists of the 10 top stocks for the next decade and 5 best Dow dividend stocks of 2010. With a B+ buy rating, Disney is one of TheStreet Ratings' top-rated media stocks.

Google's ( GOOG)

The Brand: Becoming a global brand basically overnight makes Google an interesting story indeed. Google is overwhelmingly dominant in the Internet search space, with its uncluttered home page and simple search box. The huge success of Google has made its brand one of the biggest in the world. This is no flash in the pan. Google is positioned to be a player in technology for the foreseeable future.

The Stock: Investors love technology stocks because of their growth potential. As such, what is not to love about Google's stock? In the days of the dot-com boom, Google would be trading for a multiple approaching three digits instead of the modest 24 times trailing earnings and 18 times forward earnings. With search firmly under control, Google has set its sites on software, smartphones, applications and Internet domination. All of its efforts offer the potential for big growth. At these prices, Google is a stock you can actually buy and hold as its brand gets stronger and stronger.

Major investors in Google include George Soros, who increased his position in the stock by 1,500% in the most recent reporting period. Julian Robertson at Tiger Management also owns the stock, which makes up 6.7% of his total portfolio. Google has showed up on more than one list of stocks with huge insider selling recently. Jonas Elmerraji also flagged Google as a tech stock that could rally in 2011.

To see these stock in action, check out the 7 Big Brands, 7 Big Btocks portfolio.

-- Written by Jamie Dlugosch in Minneapolis.


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At the time of publication, author had no positions in stocks mentioned.

Jamie Dlugosch is a founder and contributor to MainStreet Investor and MainStreet Accredited Investor. Formerly, he was president and CEO of Al Frank Asset Management. He has contributed editorially to The Rational Investor, The Prudent Speculator, Penny Stock Winners and InvestorPlace Media.