Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Great Brands and Great Stocks: Part 1

By Michael Lewis - Oct 2, 2013 at 10:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With Interbrand's latest rankings out, investors are presented with some compelling ideas that may not be where you expect.

Interbrand this week released its updated 2013 brand rankings, which saw Apple leap to the No. 1 spot, followed by other tech players and, of course, Coca-Cola. Having a powerful brand is, obviously, an invaluable tool -- one that bewitches consumers and investors alike. And, over time, each of the five top picks have been great long-term holdings. However, a quick glance at Interbrand's top picks shows just two that have outperformed the S&P 500 this year. When it comes to stock picking, the lesser valued brands may have greater upside potential in the coming years. Here are a few to look at.

The Top 5 as ranked
The top five brands, according to the research and consulting firm, are as follows: Apple, Google, Coca-Cola, IBM, and Microsoft. Now, Interbrand's ranking is certainly not entirely based on investment performance (though the companies' financial returns do play a part), but it's interesting to note that only Google and Microsoft have outperformed the market at large. For reference, Google is up nearly 22% year to date, while the S&P 500 has gained slightly less than 20%. Microsoft has gained 20.5%. 

The biggest year-over-year riser in Interbrand's ranking, Apple, has lost one-tenth of its market value this year.

Looking further down the list gives investors a glimpse into brand names that are growing fast and whose stocks may not be as closely scrutinized by Wall Street analysts, and potentially offer investors greater upside potential.

A few good names
Coming in at No. 72 in the rankings, but also one of the biggest gainers on the list, is Prada. The 100-year-old luxury goods maker holds one of the most iconic badges to grace a purse, and is far from going stale.

In the first half of this year, net sales grew 7.6%, driven primarily by the Asia-Pacific region. Though China has slowed down in recent years, the region continues to offer very attractive growth prospects for all luxury goods makers. The core Prada brand saw its revenues rise 17.4%. During the period, the company opened 30 new stores, and it plans to continue its expansion on a global level.

Prada's stock isn't cheap, but its valuation on a trailing basis is lower than other high-flying big-name luxury goods makers, such as Michael Kors. Over the past two years, Prada has gained more than 100% in stock value, surpassing by a multitude the top five brands on the list.

Another icon, though in a different league, is Nike ( NKE 0.14% ). No. 24 on the list, and growing 13% in brand points over the prior year, Nike is an absolute powerhouse stock -- gaining more than 42% this year. The company recently announced its earnings, and there was nothing but good news. Nike has refocused on its core brands and is seeing its Asian market stabilizing, along with solid growth in Eastern Europe. Nike is an industry leader and an innovator, with no signs of slowing down anytime soon.

For two more bullish picks from Interbrand's ranks, click here.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NIKE, Inc. Stock Quote
NIKE, Inc.
NKE
$170.24 (0.14%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/05/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.