Investing in Brand Leaders

Warren Buffett is the leader of that new category of investors--a brand investor. Strong brands drive his portfolio.

This savvy investor's strategy reflects a strong penchant for stocks with a verifiable brand identity--those household brands with value not sensitive to swings in the economy and free to increase prices to keep profits up.

Buffett supports companies that stand behind and deliver on their brand promise. And the results...well, check their marketplace position. A well-regarded brand--that intangible corporate asset with business value and economic impact that influences the behavior of customers and stakeholders--delivers in the marketplace.

Buffett owns Coca Cola, for example, the world's #1 brand as ranked by Interbrand in a 2007 Business Week magazine article when Coca Cola was determined to have a brand value of $65 billion. This brand value was determined by taking the company's outstanding stock value and then subtracting the value of its existing physical assets listed its annual report.

Brand investors focus on strong brand leaders that leverage their brand equity, which includes their cadre of loyal customers, name recognition, and their dominance in the field.

While not a perfect and error free model for investing, brand investing fits the patient investor who is comfortable with a long term-investment that uses brand power as a tail wind.

If brand can indeed be valued on a balance sheet and is used as a financial performance indicator that affects investor activity, it behooves any organization to focus on effective management of their brand assets.

Brand valuation can help companies, government agencies, and non-profits refocus their "business" and ensure that marketing and branding efforts do not drain the kitty, but create returns.

While a brand provides a unique long-term competitive advantage and has obvious commercial importance, it is important to mention that current accounting regulations are deficient in the treatment of intangible assets. That is changing as the large number of mergers and acquisitions has forced a second look at how to report brand value on the balance sheet.