Editor's note: A previous version of this article misstated that ING Direct's "Orange" savings account brand came in at 36 on WPP's list of most valuable brands; WPP's list actually refers to France Telecom's "Orange" brand. We regret the error.
The strongest stocks involve much more than share prices or numbers on a financial statement. Some of their value isn't really quantifiable in numbers at all. Recognizing the importance of brands, and jettisoning weak ones from your portfolio, can help you protect your investment returns.
In May, Apple
Granted, it's not easy to press the mute button. WPP PLC's Millward Brown unit's annual BrandZ Top 100 list included tons of competitive drama.
What consumers want
Here are the top five most valuable brands of the 100 Millward Brown ratings:
These are immediately recognizable tech stocks and blue chip companies. Some of them even elicit something close to "love" from their fans. (I'm looking at you, Apple.)
The most valuable brands reflect new trends in consumption habits. Millward Brown described new media messages that many top brands' identities now embrace:
- Assertion of individuality: Consumers desired a sense of personal expression from the products they own.
- Concern for health and wellness: Across demographic groups, shoppers paid more attention to what they put in and on their bodies.
- Concern about the environment: Millward Brown described being "green" as a "hygiene factor" in several categories -- perhaps best illustrated by hybrid and electric cars' popularity.
- Concern about product provenance: Shoppers wanted to feel good about the products they purchased, and to know that their product didn't harm others' well-being.
Bad brands hurt
This may sound awfully close to the emotional responses investors are supposed to avoid. Furthermore, even though WPP attaches a "valuation" to these megabrands, they're still intangible assets that are difficult to quantify.
Regardless, tracking strong, positive brand perceptions can help you find great investments, while tarnished brands can erode customer goodwill and financial success.
Although several of the big corporate "baddies" clung to their positions in the top 100 list, they lost some traction in the last year. BP, Bank of America, and Goldman Sachs lost 27%, 43%, and 9% of their brand value, respectively. These companies face a lot of risk from their unloved status.
Speaking of financial companies, Capital One's
Capital One's $9 billion purchase price could prove far too dear if ING loses its stellar customer-centric reputation (and many of its depositors) simply by association with Capital One. Had Capital One run its business differently over the years, ING customers might not have immediately expressed such massive mistrust.
The good, the bad, and the ugly
Annual brand rankings give investors valuable clues about the best (and the rest). They also provide hints about brands that risk losing competitive traction.
Fools should take the brand component of stock investing quite seriously. Good brands reduce risk and foster good will, luring loyal customers. Bad brands ruin reputations, turn potential customers into detractors, endanger financial success -- and tell smart investors to stay away.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on environmental, social, and governance issues.
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Alyce Lomax does not own shares of any of the companies mentioned. For more on this and other topics, check back at Fool.com, or follow her on Twitter: @AlyceLomax. 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.