Double the Market's Return

Brands matter. In fact, according to Interbrand, "branding is fundamental to business success."

A strong brand can help increase market share, prevent the commoditization of a company's products or services, displace competitors, protect margins, and make it easier for a company to hire the best employees. Taken together, these advantages can give a company a leg up for decades -- and seriously enrich investors along the way.

The power of brand
Just take a look the top brands of 2006 (as ranked by Interbrand) and their trailing-20-year returns:

On average, these top brands returned 15.8% per year over the past two decades. That's almost double what you would have earned in the broad market S&P 500 (8.4%).

Yes, brands matter.

Though we may have missed the boat
But these are big, mature brands today. While this short list of companies should be stable going forward, I doubt they'll offer the same kind of eye-popping market-beating returns. After all, these companies (excluding $110 billion Nokia, based in Finland) are now top-25 holdings of the S&P 500.

In other words, it's time to start looking for the brands that will top Interbrand's list 20 years from now. And I know a good place to start ...

Meet the world's largest and fastest-growing nation
China is a country with at least 1.3 billion people. I say "at least" because even the government doesn't have an accurate count. Its economy is growing rapidly, and the middle and wealthy classes now number some 300 million. That number might look familiar because it's also the tally for the entire U.S. population.

China is a country with serious purchasing power -- and that purchasing power is growing more formidable with each passing day. But the Chinese economy is not entirely open. The political leadership has restricted the presence of foreign-owned firms in the country to ensure that domestic firms -- Chinese firms -- benefit most from the country's amazing economic story.

Put those two realities together and you can see why I think a Chinese brand will be near the top of the Interbrand list a few short years from now.

An upcoming power brand
If you don't know about New Oriental Education (NYSE:EDU), you should. It's the leading provider of English education in China; and yet, with less than 300,000 current students, it has tremendous upside potential with just 3% market share.

And while for-profit education has earned a certain stigma in the United States, enrollment at New Oriental is a badge of honor in China. And I didn't pull that from a New Oriental SEC filing. Those words are straight from Elva Kainan, a Chinese graduate student who is learning English at New Oriental in Beijing in order to attend the Cardozo School of Law in New York City.

She took as much pride in being a member of the New Oriental community as I take in being a Georgetown Hoya -- or as Fool co-founder David Gardner takes in being a UNC Tar Heel. In case you haven't been subjected to David's basketball season rants, that's a whole heckuvalot.

More where that came from
New Oriental meets all of Interbrand's outstanding brand criteria -- recognition, consistency, emotion, uniqueness -- and it's just a $1.9 billion company. That's why New Oriental recently became a recommendation of our Motley Fool Global Gains international investing service and why we think it will offer great returns for investors willing to hold on for the next decade or more.

But China is full of growing brands with the same big potential. I'm sure of that because I just returned from a visit there with Global Gains advisor Bill Mann, where we met with a number of promising candidates. And while we haven't settled on our favorite new Chinese stock just yet, I can tell you that we're very excited about a number of them.

If you'd like to be the first to receive our stock picks from the trip or learn more about the huge investment opportunities in Asia, click here to join Global Gains free for 30 days. There is no obligation to subscribe.

Tim Hanson does not own shares of any company mentioned. Coca-Cola, Microsoft, and Intel are Motley Fool Inside Value recommendations. The Fool's has one of Interdisclosure's top disclosure policies.