Credit Suisse Research Institute, which identifies and provides insights on global themes and trends for Credit Suisse AG, released an in-depth analysis of how a company's brand can be one of the few true competitive advantages remaining in modern industry. The study focuses on industry and company conditions that are vital for brand success as well as a model for brand lifecycle that suggests key entry and exit points for investors.
"We believe a strong brand is one of the most powerful and sustainable advantages a company can have, but one that is often ignored by the financial markets," said Omar Saad, director at Credit Suisse. "We believe brand stocks will continue to outperform the market, and our proprietary framework analyzes brand lifecycles to determine how and when to invest in brands for optimal returns."
Key Findings From "Great Brands of Tomorrow."
• Stronger brands consistently generate out-sized long-term growth and returns for shareholders.
Companies that invest at least two percent of sales revenue on marketing outperform the S&P 500 by more than four percent annually. The top one-fifth of strongly branded companies outperform the market by 17 percent.
• Some industries are more brand friendly than others.
The study demonstrates that brand power is strongest in industries that have the closest proximity to the customer. This suggests that even B2B companies benefit from some direct-to-public communication. The study also demonstrates that reputation is one of the most important roles in customer purchasing decisions.
• Most brands follow a sustained arc with five distinct stages.
These stages include: emerge, hit the wall, transform/proliferate, dominate, and reinvent. For investors, this means spotting companies that transform from a niche player into a powerful brand that can be proliferated across new markets and categories.
• Tough financial times are often the most opportunistic backdrops for great brand companies.
As weaker competitors scale back and new entrants delay riskier plans, strongly branded companies emerge out of a weakened economy and outperform the market by as much as 18 percent within the first six quarters of recovery. According to Credit Suisse Research Institute, brand stocks are already beginning to outperform their markets by seven percent since March 2009.
In addition to its report, which identifies brands and their relationship to the market, Credit Suisse released a list of 27 brands that it believes will outperform based on their brand advantage. They include: Alibaba.com, Almarai, Amazon, Apple, BIM, Capitec, China Merchants Bank, Commercial Aircraft Corporation of China, Enfamil, Facebook, Hyundai Motor, Indian Hotels, Julius Baer, Li Ning, Mahindra & Mahindra, MercadoLibre, Mercedes-Benz, Polo Ralph Lauren, Sonova Holding, Swatch, Tiffany & Co., Tingyi, Trader Joe's, Tsingtao Brewery, Under Armour, Uniglo, and Yakult Honsha.
