Does Brand Perception Boost Share Price?

A look at the impact of brand perception on the share price of media companies.

Jan 23, 2014 at 3:51PM

The latest release of the annual rankings of brand perception in the United States by YouGov BrandIndex reveals that some of the companies that have been perceived as major brands in the past remain so, although there are some new additions that are important to know about.

We'll look at some of the companies and stats. More importantly, though, we'll see if these types of rankings are valuable in making investing decisions by determining if the brands perform in conjunction with the perceptions of the public.

My primary focus will be on companies with a media presence of some type and how they fared in the rankings.

List of top 10 brands
First let's look at a complete list of the top 10 brands in the survey. Leading the way was (NASDAQ:AMZN) in the no. 1 position, followed in order by Ford, Subway, History (formerly the History Channel), Lowe's, Google's (NASDAQ:GOOGL) YouTube, Walgreen's stores, V8, Cheerios, and Kindle.

It was interesting to see consumers differentiate from Kindle. That also happened (when looking further down the list) with Google and YouTube, as well as Apple (NASDAQ:AAPL) with its iPhone and iPad products.

As you can see, of the top 10, four of the brands were in the media space: Amazon, History, YouTube, and Kindle. What's important is, with exception of History, all of these are digital companies. When you go to the no. 11 through No. 20 spots, that pattern continues on, with all the media companies being new media--companies like Netflix (NASDAQ:NFLX), Google, and Apple. The point is that the most recognizable media brands are almost all digital properties.

Does performance line up with perceptions?
Now that we know the most popular brands as perceived by people in the U.S., let's look at if it lines up with the performance of the companies identified.

We'll start with Over the last 12 months, Amazon has climbed over 46% in share price. When measuring Kindle as a stand-alone brand, the performance is strong as well. Sales jumped again in December, with activations on Christmas day soaring 24 times from the rest of the days in the month. The primary value there is the downloads paid for by Kindle users.

YouTube finished in the no. 6 spot, with Google itself in the no. 19 position. Over the last 12 months, Google is up over 62%. An interesting thing to note is that YouTube, while very recognizable, isn't as important at this time as a revenue generator for Google. This is because it needs to build out its premium video content in order to capture the highest-paying digital ad spending. That means that in this case, branding isn't necessarily a key element to consider when analyzing the overall company.

Apple continues to struggle, although if you bought the stock after it dropped below $400.00 per share in July then you would have enjoyed a nice surge in the share price. For the past 12 months, though, it is up only a little above the 10% mark.

Netflix is among one of the better performers for the year in this category, jumping by about 239% over the last 12 months as of this writing. Investors are getting a little concerned over this huge upswing, and a growing number in the industry are starting to believe shareholders may have to endure a significant correction sometime in the near future.

Politics as a metric
One interesting aside to this study is the inclusion of brand perception as measured by politics. This is where some major difference occur. The good news is that major brands such as Amazon, Ford, and Subway were perceived as strong brands, not matter what the political persuasion. This is an important consideration when looking at the long-term performance of a company.

The most differentiation came from the Republican side, with brands like 21st Century Fox (NASDAQ:FOXA) and Chick-fil-A standing out. Here again there is the Fox brand in and of itself, along with the strongly branded Fox News Channel among Republicans.

It should also be noted that A+E's History was important to Republicans as well as Independents. Disney, which owns 50% of A+E, probably doesn't receive a lot of value from the success of History because of its size. All of pieces of its puzzle, added together, do make a difference for it, however.

For investing purposes, it's important to understand the commitment to a brand for the long-term success of a company.

Brand perception and value
From looking at the perceptions of brands and the specific performances of the top companies in 2013, the conclusion is that they appear to go hand-in-hand. The more a brand is perceived in positive light, the more apt it is to do well.

Remember to keep in mind that a brand can be considered positive in the specific demographic it serves (like with Fox), and still make money, while at the same time being looked upon negatively from other demographics.

Brand perceptions are important. While we all need to continue to do our own research, it's one of the factors that needs to be taken into consideration in making an investment decision.

Sleep soundly with these three stocks in your portfolio
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Gary Bourgeault has no position in any stocks mentioned. The Motley Fool recommends, Apple, Google, and Netflix. The Motley Fool owns shares of, Apple, Google, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information