Santa may have gone back to the North Pole until next year, but I'm always making lists and checking them twice to find out which companies have been naughty and nice. With our calendars having rolled over to the new year, it's time we take a closer look at the most valuable global brands.
Research firm Interbrand compiles a list annually that classifies the brand power and earnings potential of companies worldwide with an easy-to-understand system that essentially ranks "brand value." Today, we'll take a look at three companies in Interbrand's top 100 that you can buy without fear in 2013.
Apple's share price was hammered in the fourth quarter, losing about one-quarter of its value as investors questioned the company's ability to drive organic growth with the mobile arena becoming increasingly crowded. Samsung, Google, Nokia, and Research In Motion are all producing multiple versions of smartphones.
Despite this increased competition, Apple is still the leader of the pack when it comes to innovation (Apple TV, iPad Mini, Apple Radio, iPhone 5) and it has an unbelievably faithful following. Its Apple stores crush all other retailers in terms of sales per square foot and the company is sitting on a heap of $121 billion in cash with the ability to generate about $40 billion in free cash each year. With the company valued at just nine times forward earnings and with a projected five-year growth rate of 20.7%, I'm not exactly sure how you can go wrong buying Apple.
Let me put the bias warning out there right now, because I own Dell in my own portfolio; but if you're looking for a rebound candidate of massive proportions, then look no further than the No. 49 largest global brand, Dell, in 2013.
In my One Person's Trash Is Another Person's Treasure portfolio, I laid out three key reasons that I feel Dell could be a long-term investor's delight moving forward. First, a rebound in PC sales coupled with new, lighter laptops should help the company better compete against the likes of Apple's MacBook Air, while competitor Hewlett-Packard (NYSE:HPQ) struggles with massive layoffs and other cost-cutting efforts. Second, Dell's service and networking revenue is consistently rising by double digits and should provide the backbone of growth in the second half of this decade. Finally, Dell is extremely attractive from a valuation basis, with more than $5 billion in net cash and a forward P/E of less than seven. As I mentioned previously, HP may appear cheaper, but its restructuring will take well into 2014 to complete, leaving Dell as the cheapest PC and networking play as far as I can see.
Honestly, you could take your pick here between Visa (NYSE:V) and MasterCard and get very few complaints from me, but the sheer fact that MasterCard boasts almost $46 in cash per share as compared to just $4 for Visa places MasterCard, the No. 94 brand on Interbrand's global list, on my buy list for 2013.
As I've noted previously, both MasterCard and Visa share the unique trait of being transaction-processing facilitators. This means they aren't physically lending consumers money and aren't responsible for bad loans if consumers default, like their processing peers American Express (NYSE:AXP) and Discover Financial Services (NYSE:DFS) can be. Instead, these two are focused solely on increasing transaction dollar volumes and expanding their reach into emerging markets that are still largely immune to the growth slowdown prevalent in Europe and the U.S. With 85% of transactions still conducted in cash worldwide, MasterCard's opportunities for growth are as wide as the ocean.
Stay tuned for this article's sequel tomorrow, when I'll reveal three top brands to avoid in 2013.
Fool contributor Sean Williams owns shares of Dell, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
The Motley Fool owns shares of Apple, Google, and MasterCard. Motley Fool newsletter services have recommended buying shares of Apple, Google, Visa, and American Express, as well as creating a bull call spread position in Apple and writing a covered strangle position in American Express. Try any of our Foolish newsletter services free for 30 days. 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.