Steve Jobs said the name Apple Computer was created to edge out his former employer Atari in the front of the phone book. That's not the most visionary branding strategy. But over the years, however, Jobs' approach to branding evolved, and he came to realize the importance of aligning the Apple brand with the values represented by the company.
All great companies strive to accomplish this feat, but very few actually succeed. In this second article in a series on brands, I will focus on the American companies that are dominating around the world. Their brands form a strategic advantage that can lead to above-average returns for investors.
Good, old-fashioned American brands
Since 2001, the branding consultancy firm Interbrand has published an annual survey disclosing the best global brands. The most recent Interbrand report provides insight on what many of us already know -- American brands are everywhere. The chart below reflects the top countries based on the brand value attributed to each respective country.
Source: Interbrand 2011 (reflects the top 100 brands). Adds to less than 100% due to rounding.
As shown, U.S. companies own the lion's share of the world's greatest brands. The rest of the world doesn't come close to adding up to America's slice of the pie.
Because American companies create quality products, their brands are highly regarded around the world. In my previous article on brands, I noted that great brands stem from great products, and U.S. firms seem to have a significant edge on the competition.
The data also reveals an interesting perspective on emerging markets. Notice that the BRIC countries (Brazil, Russia, India, and China) are conspicuously absent from the chart. In fact, of the world's 10 largest economies by GDP, only five are reflected in the chart above.
For the alarmists concerned about the decline of Western countries, consider the competitive advantage provided by American brands. While economic output might be rapidly increasing in China and Brazil, these countries are decades away from building a portfolio of brands that compares with the U.S.
The cream of the crop
Near the top of the list of global brands, the Interbrand survey presents a similar theme. In the past 10 years, less than a handful of foreign companies have appeared in the top 10, and the results were no different in 2011. The top 10 brands were solely American companies.
Source: Interbrand 2011.
In the list above, Google stands out as the only company started after 1990. For the most part, these companies have been crafting name brands for decades, a factor that explains their prevalence around the world.
Furthermore, each of the blue chip American stocks shown has significant exposure to international markets. For example, GE, Apple, Intel, and HP derive 53%, 65%, 85%, and 65% of sales from non-U.S. markets, respectively, according to most recent figures. The rest of the companies generate at least 30% of revenues outside of the U.S. and no more than 50% of revenues from a single continent.
Investing in the companies behind these strong American brands would simultaneously provide international exposure as well.
The lesson for investors
The Interbrand analysis sheds light on the best global brands, and provides a valuable point of reference for investors. Toward the end of 2010, Fool co-founder David Gardner appeared on CNBC to discuss his investing outlook for the year ahead. Despite the gloomy forecast delivered by CNBC's pundit (surprised?), David expressed optimism about good, old-fashioned American brands.
Since the interview, how did the best American brands perform? Solidly, as it turns out. If you'd purchased equal shares of the above 10 brands back in October 2010, you would have seen growth of 19%. Compared to the Dow's return of 13% and the S&P's 10%, that's a decent return in a little over a year.
Taking a closer look at the world's best brands reveals two distinct trends. Most notably, American brands dominate the global landscape. In addition, well-established, innovative companies build valuable brands by creating great products and dedicating significant resources to this intangible asset. Not coincidentally, these companies can also provide sizable returns for investors.
To discover investment opportunities in the best American brands, read the recent Motley Fool report, " 3 American Companies Set to Dominate the World ." The report highlights powerful brands that will thrive in emerging markets and provide significant upside for investors. Download a copy now for free.