To Find the Best Stocks, Start With the Best Brands

Most investors are constantly on the search for great stocks to buy. A useful place to begin researching such companies is the list of the world's most valuable brands, which goes a long way toward finding which companies will stand the test of time. After all, the world's strongest brands have built fortress businesses that can clearly thrive, even when the economy takes a nosedive.

Brand consultancy Interbrand recently released its list of the world's most valuable brands. The report details which companies have changed human life to such dramatic degrees that their products and services are used on a daily basis by millions, and can help lead us to great stocks to buy for the long-term.

Two technology titans on top
This year, technology giants Apple (NASDAQ: AAPL  ) and Google (NASDAQ: GOOGL  ) rank first and second, respectively. It's not entirely surprising, given how much of a role these companies play in consumers' everyday lives. According to technology market research firm IDC, Apple's iOS and Google's Android together made up 92.5% of all smartphone operating-system shipments in the second quarter of 2013, which represented a year-over-year increase.

Apple is the most valuable company in the world by market capitalization, worth about $450 billion at recent prices, so it stands to reason that the company has the most valuable brand in the world as well. Apple's growth trajectory in recent years has been nothing short of amazing: The company booked 45% revenue growth last year versus 2011 and has generated 43% revenue growth since 2008, compounded annually.

Meanwhile, Google's massively successful Android business is supplemented by its leading position in search. Google's businesses collectively raked in more than $50 billion in revenue last year. The company's growth has remained impressive, even as it balloons into one of the biggest companies on the planet. Google managed to grow its 2012 revenue by 32% year over year, and since 2008 it has increased revenue by a 23% clip, compounded annually.

In addition, future smartphone-industry growth is expected to be strong, meaning Apple and Google should continue to do extremely well in the years ahead. IDC projects the worldwide smartphone market to grow by 7.3% in 2013. Increasing demand for smartphone shipments is expected to be spread across geographies, with particular strength noted in the emerging markets. By 2017, total smartphone shipments are expected to reach 1.7 billion units, compared with 1 billion shipments projected this year.

A legendary consumer company takes third place
Coming in just beneath Apple and Google in terms of brand strength is beverage giant Coca-Cola (NYSE: KO  ) . Coca-Cola actually held first place for 13 years running, since the survey began in 2000, but it slipped to third in light of the fact that soda consumption has stagnated in many markets thanks to consumers' increasing preferences for lower-calorie products.

At the same time, there's no denying Coca-Cola's status as a corporate juggernaut. Despite its drop, the company remained the world's most recognizable brand in the survey. It's hard to argue with the report, judging by the company's financial success over the length of its existence. Coca-Cola generated $48 billion in total revenue in 2012 and has grown revenue at a compound annual rate of 10.7% since 2008.

The Foolish conclusion
Apple, Google, and Coca-Cola represent the three most valuable brands in the world, and it's not hard to see why: These three companies generate the profits to more than justify the findings, and their shareholders have been handsomely rewarded in kind.

Apple and Coca-Cola pay solid dividend yields of 2.6% and 3%, respectively, while Google instead reinvests its cash flow in its business, resulting in outstanding capital gains. In either scenario, these companies generate massive amounts of cash flow and maintain strong balance sheets, and the end result is that investors win big. Making things even better, investors in Apple, Google, and Coca-Cola should continue to do well for the foreseeable future, thanks to these three stocks' maintaining massively profitable businesses with world-class brands.

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