In a world where share markets increasingly ignore traditional financial metrics to figure out the worth of companies, brand value has never been more important.
But even a quality as ethereal as brand value can be measured.
Each year, United States consultancy, Interbrand, publishes a list of the top 100 brands in the world.
Clare Capital analyst, Robin Basra, said the rankings are calculated as a combination of three attributes – financial forecasts, the role of the brand and the strength of consumer preference for the brand.
And the world has dramatically shifted to technology over the past 10 years.
"A decade ago, Coca-Cola Co (NYSE: KO), IBM (NYSE: IBM), Microsoft Corporation (NASDAQ: MSFT), Google (Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG)) and General Electric Company (NYSE: GE) represented the most valuable brands in the world," said Basra.
"In 2020, Google and Microsoft retain their positions, Apple Inc (NASDAQ: AAPL) has replaced IBM as the most valuable technology brand, and the others have fallen lower down the order – signalling changing dynamics and consumer preferences."
Another nod to the way the globe is shifting is that a non-American company, Samsung Electronics Co Ltd (KRX: 005930), snuck in at fifth place.
Valuable brands outperform rest of share market
This brand value thing matters on the stock market.
In a year when most publicly listed companies were hammered by COVID-19, the share prices of the five most valuable brands were up 54% on average.
Even when generalised out to the 100 most valuable brands, their collective share price has outperformed the S&P 500 Index (SP: .INX) by more than double.
Top 5 brands | 2010 rank | Age (years) | 2020 brand value (USD) | Brand value multiple 2010 to 2020 | Revenue multiple 2010 to 2020 | Share price change in last 12 months |
1. Apple Inc (NASDAQ: AAPL) | 17 | 43 | $323 billion | 6.1x | 7.1x | 80% up |
2. Amazon.com, Inc (NASDAQ: AMZN) |
36 | 26 | $201 billion | 8x | 4.6x | 78% up |
3. Microsoft Corporation (NASDAQ: MSFT) | 3 | 45 | $166 billion | 9.5x | 10.8x | 47% up |
4. Alphabet Inc (NASDAQ: GOOGL) | 4 | 22 | $165 billion | 6.6x | 6.4x | 37% up |
5. Samsung Electronics Co Ltd (KRX: 005930) | 19 | 82 | $62 billion | 4.7x | 1.5x | 27% up |
Source: Clare Capital. Table created by author |
Most valuable brands by sector
The brand leaders for each sector have also shown healthy share price growth.
The exception is Toyota Motor Corp (TYO: 7203), which perhaps isn't surprising considering the economic downturn.
Sector | Most valuable brand | Age (years) | 2020 brand value (USD) | Share price change in last 12 months |
Technology | 1. Apple Inc (NASDAQ: AAPL) | 43 | $323 billion | 80% up |
Beverage | 6. Coca-Cola Co (NYSE: KO) | 134 | $57 billion | 2% up |
Motoring | 7. Toyota Motor Corp (TYO: 7203) | 87 | $52 billion | 4% down |
Apparel | 15. Nike Inc (NYSE: NKE) | 56 | $34 billion | 41% up |
Luxury | 17. LVMH Moet Hennessy Louis Vuitton SE (EPA: MC) | 97 | $32 billion | 26% up |
Source: Clare Capital. Table created by author |