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Brand as driver of stock price

As investors, we sometimes get too fixed on trying to find financial metrics that provide some level of predictability to stock price movement.  A recent study shows that low price/sales and price/earnings ratios aren’t the only thing we should be looking at.

brandzThe BrandZ portfolio, developed by leading public relations firm, WPP’s Millward Brown Optimor, has spanked the S&P500 during this last doozy of a market.  Makes sense, too, that a portfolio of the most valuable brands in the world (large caps like Google, Apple, Intel) perform better than the market during a major downturn.

According to the TechCrunch article:

The BrandZ study, commissioned by Millward Brown Optimor owner WPP , measures the brand equity of thousands of global “consumer facing” and B2B brands, and including over 1 million consumers from more than 20 countries. The ranking is calculated using a methodology called “Economic Use”, taking into account the role that brands play in purchase decisions and identifying what proportion of the business value can be attributed purely to the brand. Besides inputs from the BrandZ study, the ranking uses financial data from Bloomberg and market and product data from Datamonitor. The ranking takes into account regional variations since even for truly global brands measures of brand contribution might differ substantially across countries.

Maybe firms should spend more time and focus bolstering their brands than on propping up their stock prices.

Hat tip to TechCrunch.