The Top 12 Brands Likely to Survive

A recent Seeking Alpha post surveyed The Top 12 Brands Likely to Disappear. While we don't disagree with any of the selections on that list, we believe it might be useful for investors to consider a list of brands that are currently under fire but appear likely to survive -- and eventually thrive. Investors who successfully invest in undervalued companies that own valuable brands should do quite well over time.

1. Playboy adult entertainment: The brand is owned by Playboy Enterprises (NYSE: PLA), which also owns the Playboy Mansion, a unique real estate property in Bel Air, California. Playboy is much more than a publishing business, with future value likely to come primarily from brand licensing. The latter is already a significant and growing generator of operating income. The company needs to reposition itself as a lifestyle company rather than a publishing business.

2. American Express payment cards: While American Express (NYSE: AXP) is close to the eye of the ongoing credit storm, the company appears to have sufficient liquidity to weather the storm. The brand remains strong, and the franchise enjoys sustainable competitive advantage, both with consumers and merchants. Having Warren Buffett and Bruce Berkowitz as major shareholders doesn't hurt, either.

3. Zale jewelry: Zale (NYSE: ZLC) has a leveraged balance sheet, but also substantial tangible book value backed by an appreciating asset -- jewelry. If inflation ever rears its ugly head, a company like Zale may help investors keep up, as the company's significant inventory would likely keep pace with consumer price increases.

4. Sony consumer electronics: The Japanese giant Sony (NYSE: SNE) enjoys one of the most recognized brand names in the world. With shares trading at a fraction of revenue and a low multiple of normalized earning power, Sony may not only thrive as a brand but may also reward investors for their patience.

5. Steinway & Sons grand pianos: Steinway Musical (NYSE: LVB) owns the venerable piano brand as well as a number of band instrument brands, including Conn-Selmer and Leblanc. Perhaps unknown to many investors, Steinway also owns a large office building in Midtown Manhattan and significant real estate on Long Island, New York. Depending on the value of those real estate holdings, investors may be in a position to own the musical brands virtually for free.

6. Sears stores: Eddie Lampert-run Sears Holdings (Nasdaq: SHLD) owns the Sears, K-Mart, Die Hard, Land's End and other consumer brands. While Sears and K-Mart are seriously challenged as brands, the company itself has everything in place to maximize shareholder value, most of all a master capital allocator at the helm.

7. Sotheby's auction services: The respected auction house Sotheby's (NYSE: BID) shares the top of the high-end auction world with Christie's. It appears highly likely that Sotheby's will remain a go-to place in the auction business for a long time to come. The company owns its headquarters building in Manhattan and recently attracted the attention of investor Steven Cohen of SAC Capital.

8. Skechers footwear: The Skechers (NYSE: SKX) brand retains a wide following and is owned by a company with one of the strongest balance sheets in the footwear industry. The company is a borderline Ben Graham-style "net net," with current assets minus total liabilities approximating recent market value.

9. K-Swiss athletic footwear: K-Swiss (Nasdaq: KSWS) invented the leather tennis shoe in the 1960s and maintains a classic look that has not changed much over the decades. While K-Swiss is a tired brand right now, CEO Steven Nichols has managed to revive the brand twice before, and we would not bet against him.

10. Dell computers: Dell (Nasdaq: DELL) faces many challenges, ranging from weak global PC demand to the advent of low-cost netbooks. Nonetheless, the company's direct model continues to give it a cost advantage. With a solid balance sheet and capable management, Dell is certain to survive. The only question is whether it will ever again reach its prior heights.

11. LendingTree online loan marketplace: Owned by InterActiveCorp (Nasdaq: IACI) spinoff Tree.com (Nasdaq: TREEV), LendingTree is seeing a resurgence in business due to low refi rates. Tree.com has a large net cash position and also owns the website RealEstate.com, providing a strong foundation for future value creation.

12. New York Times newspapers: While the writing seems to be on the proverbial wall for the newspaper business, the New York Times (NYSE: NYT) brand will survive -- the only question is in what form. The company may have to find a way to charge for online content or to monetize its vast content library.

Disclosure: Long PLA. No position in other companies mentioned in this post.

Comments

[twotowers:]

New York Times?
34 million in the bank....
1,300 million in current debt........
30% drop in advertising this quarter and the same expected next quarter.
The Globe burning through more than 1 million a week?

How did you come to that conclusion -given f all the companies to write about you say the NYT would is one of the top 10 to survive? What am I missing?

Apr 23 11:14 AM

[The Manual ...:]

No one needs an article saying that Google and Coca-Cola will survive. The point was to find brands that are in distress right now but that will not go away. Obviously, whenever you do such an article, there will be a lot of disagreement -- that's the point.

As far as the New York Times specifically is concerned, there is no doubt it is one of the strongest journalistic brands in the world. Many companies would love to own that brand, just as Rupert Murdoch felt compelled to pay $5 billion to own the Wall Street Journal. The New York Times needs to change its business model, and do so fast. Their cost structure is way too bloated for a world in which classifieds are moving online and every citizen can become a journalist via a blog or a site like Seeking Alpha. As a result, the New York Times must make some very hard choices. There is no doubt, however, that the brand has value, both in credibility and attracting eyeballs. For starters, the New York Times company should immediately look at disposing every single non-core asset it owns, including The Boston Globe, Herald Tribune, About.com, Metro Boston (49%), Donohue Malbaie (49%), Madison Paper Industries (40%), quadrantONE (25%), New England Sports Ventures (17.75%), the company's 58% ownership of its New York City headquarters building and another 2.5 million square feet of owned office and printing plant space.

Apr 23 11:59 AM

[notsosmart:]

the nyt just gave huge increases to its top management.i guess its for the great job they have done.push & bash the union @ the boston globe & love the unions @ the nyt.what phonies.

Apr 23 04:06 PM

[Ravi Nagarajan:]

"While Sears and K-Mart are seriously challenged as brands, the company itself has everything in place to maximize shareholder value, most of all a master capital allocator at the helm."

Sears itself may not have the greatest brand equity, but Kenmore, Craftsman, and Lands End certainly have value. Add this to the property values of company owned store locations and the Hoffman Estates HQ and essentially what you have is a longer term play on commercial real estate with a free option on the retail operations provided that the retail operations do not consume cash. Lampert is unlikely to permit the stores to consume cash in my opinion.

May 13 09:02 PM

[Rubens Morse:]

I think you are very wrong about Playboy, Zale and Steinway.

Steinway's brand will survive for sure but I'm not sure the company will in its current form. The most valuable unencumbered real estate is the store and office building on 57th Street. The Queens factory site could only be sold in a total liquidation scenario, if the factory continues to run they won't sell it. There is a worrying trend of Steinway financing more and more of it's dealers inventory, since several banks and GE are cutting lines in this segment. They will probably have bad debt problems from the dealer financing in the near future.

Zale is just an overleveraged retailer, it could go under and no one would miss it, like Circuit City and Linens N Things. I also think Playboy is becoming less and less relevant in today's digital world. The latest proof of that is the magazine will probably go from monthly to bi-monthly. Raising the price of the magazine to $5.99 is a pretty desperate move and should backfire. The reason they are going down (I think the stock will eventually go to $0) is that today you can find better and cheaper adult entertainment online, and their brand is just not relevant for the new generation. Their old time readers are getting older and dying, the young guys don't care about Playboy.

May 21 01:02 PM