Brands evoke sentiments like excitement, refreshment, luxury, or quality. Big companies spend billions of dollars hoping to make their brands memorable enough for consumers to instinctively reach for. But do the dollars these companies spend to achieve top-of-mind status translate into bottom-line profits for their shareholders?
Let's take a look at the top global brands to see how their stocks have performed against the Dow Jones Industrial Average during the past decade.
Consultancy firm Interbrand publishes an annual survey bestowing top honors on the best global brands. As you can see below, three of the top five brands for 2012 belonged to Dow component companies.
Change in Brand Value From 2011
Remarkably, these same three Dow companies -- Coca-Cola, IBM, and Microsoft -- have claimed three of the top five spots every year since the 2001 inception of the Interbrand survey. The other top spots have consistently included industrial goods conglomerate General Electric and tech heavyweights Intel and Nokia. And since 2010, Google has secured a top-five spot on the list.
Of these five brands, both Coca-Cola and IBM have been in existence for over a century. Founded in 1886, the world's largest beverage company boasts 500 brands including 15 "billion-dollar brands" like Diet Coke, Coca-Cola Zero, and Sprite. The company sells nearly 27 billion unit cases worldwide equaling 1.8 billion servings per day. Meanwhile, since IBM's founding in 1910, it's been helping us "build a smarter planet" through its technological products and services. Undoubtedly, the longevity of both companies has helped them gain traction with billions of customers and build worldwide exposure.
How the best global brands stack up
During the course of their publically traded lives, these companies' shareholder returns have all been nothing short of remarkable. However, the past 10 years have evolved differently for stockholders of these five companies.
Let's take a look at how the top global brands performed during the past decade.
10-Year Total Return
Sources: Interbrand, The Motley Fool.
As far as stock performance goes, the two relative newcomers to the fab-five list -- Apple and Google -- performed most impressively during the past decade. Meanwhile, Interbrand list veterans Coca-Cola, and IBM also yielded impressive returns. Except for Microsoft, all of the companies significantly outperformed the index, since investing in the SPDR Dow Jones Industrials Average ETF would have returned roughly 60% in the same time period.
Blockbuster brands = big returns?
While it's never a wise idea to invest in a company solely based on a single data point, more often than not, company performance is aided by a well-recognized and strong global brand. Undoubtedly, these companies spend massive dollars and countless hours honing their brands. But it can all be irrelevant without the existence of other successful company attributes like great management, solid financials, and a distinguishing and sustainable competitive advantage.
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