Five Things You Need to Know: The Top 10 Most Powerful Global Brands
Do the stocks of companies with strong brand value really outperform the market?
Kevin Depew's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. The Top 10 Most Powerful Global Brands
For each of the past three years the firm has compiled a list of what it believes to be the world's 100 most powerful brands. The top 100 brands together have a total value equal to the Gross Domestic Product of Italy, according to the Financial Times.
Below are the top 10 most powerful brands, according to Millward Brown Optimor.
2008 Brandz Top 10 Most Powerful Brands
1. Google (GOOG)
2. General Electric (GE)
3. Microsoft (MSFT)
4. Coca-Cola (KO)
5. China Mobile (CHL)
6. IBM (IBM)
7. Apple (AAPL)
8. McDonald's (MCD)
9. Nokia (NOK)
10. Marlboro (MO)
Notably absent this year from the top 10 is Wal-Mart (WMT), which slipped to 13th, the firm said. Note that eight of the top 10 brands are US-based companies. Good news for those concerned about the decline of the American business empire.
2. Brands for Better and Worse?
Now, why do we care about this "branding" business? According to Millward Brown Optimor, the reason is simple: The stocks of companies with strong brand value enjoy markedly stronger returns in good times and also during bad times.
The Financial Times turned to the chief marketing officer of consulting firm Landor Associates to verify this truism: "There is remarkable consistency between strong brand value and stock performance," Landor's Hayes Roth told the FT.
Really? Well, the certitude of this belief system forced us to do a little work on our own. You know how we hate to take things that sound so reasonable, so logical, at face value.
Millward Brown Optimor has created a "Brandz" portfolio incorporating all the brands in its top 100 survey that it was possible to invest in, the FT explained.
Sure enough, last year the Brandz Top 100 portfolio was up 25%, the newspaper said, which handily beat the S&P 500's 3% return. Below is the year-over-year performance:
2008 Brandz Top 10 Most Powerful Brands, year-over-year performance
1. Google (GOOG) 11.8%
2. General Electric (GE) -6.9%
3. Microsoft (MSFT) 3.3%
4. Coca-Cola (KO) 15.4%
5. China Mobile (CHL) 82.2%
6. IBM (IBM) 31.5%
7. Apple (AAPL) 77%
8. McDonald's (MCD) 20.5%
9. Nokia (NOK) 15.7%
10. Marlboro (MO) 3%
S&P 500: -6.3%
But take a look at the year-to-date performance:
2008 Brandz Top 10 Most Powerful Brands, year-to-date performance
1. Google (GOOG) -21.9%
2. General Electric (GE) -11.8%
3. Microsoft (MSFT) -15.7%
4. Coca-Cola (KO) -2%
5. China Mobile (CHL) -0.14%
6. IBM (IBM) 15%
7. Apple (AAPL) -18.7%
8. McDonald's (MCD) -1%
9. Nokia (NOK) -24.4%
10. Marlboro (MO) -5.1%
S&P 500: -5.3%
Quite a different story. Ok, so what's the bottom line? These set-it-and-forget it portfolios sure sound appealing. However, the point at which you begin the measurement is critical to success. In other words, you still have to buy and sell them at the right time to make money.
For more on the business of brands, check out Hoofy and Boo!
3. Another Citi Dividend Cut?
Citigroup (C), which cut its dividend 41% in January, may cut or eliminate its dividend altogether, Oppenheimer & Co. analyst Meredith Whitney said this morning.
According to Bloomberg, Whitney tripled her 2008 loss estimate to 45 cents a share and reduced her 2009 profit estimate to 90 cents a share from $2.50.
Whitney's forecasts have increasingly gained a mainstream audience and following. Last October Whitney correctly predicted Citigroup would be forced to reduce its dividend to preserve capital.
Whitney today also cut her rating on Wells Fargo to Underperform saying the company may have to fund a $4.5 billion shortfall in reserves.
4. Come to Mama...
Honestly, we started to just let this next item slide. Really, we did. But, in the end, we decided to "come to mama," as instructed.
Look, we know Meredith Whitney has been, and continues to be, vocally bearish on banks. But we were a bit surprised to learn - from the New York Times, no less - what, exactly, she's a bullish on.
According to the Times, John C. Layfield, an investment banker and professional wrestler, has developed a nonalcoholic, caffeinated version of a popular Dominican Republic "sexual endurance drink" called, seriously, Mamajuana Energy. (NYT suggested pronunciation: mama-JA-wana.)
"It's more of a sex potion," Mr. Layfield told the Times, adding, "Think of it as liquid Viagra." Mamajuana Energy's catchy slogan is "Come to mama."
And why, exactly, are we focused on this? According to the Times, one of Layfield's investors in Mamajuana Energy is his wife, Meredith Whitney.
5. Cool to Be Frugal
We ran across an interesting piece in USA Today this morning playing right into our theme of a growing wave of resentment against consumption and a disassociation from luxury goods and symbols of wealth.
According to the article, "Teens Turn to Thrift as Jobs Vanish and Prices Rise," rising costs of typical teenage indulgences are causing teens to do something they rarely do: be thrifty. As the article notes, "It's even becoming cool to be frugal."
"It's a little tacky in the economic unrest to tote a big logo bag," Holly Siegel, senior editor of Ellegirl.com, told the newspaper. "It is way cooler to get a super deal on that shirt rather than being able to spend the most money on something," Anna D'Agrosa, director of Consumer Insights at The Zandl Group, told USA Today.
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