One Sign of a Strong Stockhttp://www.fool.com/investing/general/2009/11/03/one-sign-of-a-strong-stock.aspx Julie Clarenbach
November 3, 2009
Think about your favorite company, the one you believe in the most. Now imagine getting its logo tattooed on your biceps.
What's your immediate, knee-jerk reaction? I'm going to guess you think it's a bad idea.
Even so, thousands upon thousands of Harley-Davidson owners have done it -- it's one of the oldest and most popular brands-as-permanent-affiliation. And they aren't alone.
So what's the difference between the company you thought of and Harley-Davidson? And why should it matter to your investing?
Four ways to get ahead
Competitive advantages come in many forms:
But not every company can avail itself of these gold-standard competitive advantages. Other than economies of scale, those competitive advantages are largely predicated on industry membership.
Everyday retailers don't have intellectual property rights, nor are they likely to have network effects or high switching costs. What they do have is brand.
Standing out in the crowd
Brand may be difficult to measure with any confidence, but it points toward something important: the customer's attachment to this particular product as opposed to all of the other options he or she could pursue.
Think about Nike -- people pay hundreds of dollars for athletic shoes that get far more wear on the street than they do on the court. Polo Ralph Lauren (NYSE: RL ) can sell a polo shirt for $200 simply because it has the polo-player logo, while an identical shirt minus the logo would fetch a fraction as much.
But brand loyalty on the basis of style fads isn't sustainable over the