NEWS14 December 2015

Investing in strong brands doubles returns

UK — Investment strategies based on the most highly branded companies – where brand value makes up a high proportion of overall enterprise value – would have led to a return almost double the average for the S&P 500 according to Brand Finance.

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The valuation and strategy agency has tracked the brand values of world’s top brands for almost ten years and by taking a retrospective look at the share price of these brands, and their subsequent stock market performance, it has identified a clear link between strong brands and stock market performance.

Between 2007 and 2015, the average return across the S&P was 49%. However investing in companies with a brand value to enterprise value (BV/EV) ratio of greater than 30% would have generated returns of 94%. Investing exclusively in the 10 companies with the highest BV/EV ratios would have resulted in a 96% return.

Brand Finance chief executive David Haigh (pictured) said: “These findings demonstrate the powerful effect brands can have on the long term financial performance and enterprise value of businesses. Anyone tasked with reporting to shareholders should have brand strength and brand value front of mind.”