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Google Inc (GOOG), Starbucks Corporation (SBUX), The Coca-Cola Company (KO): These 3 Stocks Have Wonderful “Brand Moats”

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Every year a series of research firms and publications (such as Millward Brown and Business Week) choose the most recognizable brands in America. The top ranked company fluctuates from year to year ,but it typically includes household names like McDonald’s Corporation (NYSE:MCD), Microsoft Corporation (NASDAQ:MSFT), and The Procter & Gamble Company (NYSE:PG).

What makes a “good” brand is, to some degree, a matter of opinion, but I think investors should follow the most recognizable brands. A good brand gives a company a “brand moat, a competitive edge by a sheer label alone.

In my opinion these are the best brands of the “most recognized” list. They have the strongest and most loyal followings.

The happiest place on earth

Google Inc (GOOG)

Google Inc (NASDAQ:GOOG) has the happiest workplace on earth. Well, that’s at least what Vince Vaughn would have us believe. I recently saw “The Internship,” and I’ve seen the 20/20 specials showing workers taking naps and playing ping pong, so I have to believe that there’s some truth behind the humor. Yes, with free food, motorized scooters, and massages, working at Google Inc (NASDAQ:GOOG) seems like a vacation for most of us.

I don’t mean to belabor this fact but it should matter to investors as much as any numbers do. Google Inc (NASDAQ:GOOG)’s “workplace” creates a unique brand that’s synonymous with excellence and this resonates both with top tech candidates and consumers. You need to have the best talent to win in tech and Google’s 17% ROE, combined with 25% growth in revenue and EPS, prove that Google Inc (NASDAQ:GOOG) has it.

Google Inc (NASDAQ:GOOG)’s a really unique company because it’s increased earnings even as its costs have skyrocketed. That’s not supposed to happen. Increased costs typically are an excuse for flat EPS, just look at, Inc. (NASDAQ:AMZN) over the past decade. But the difference lies in how Google has spent money: on good talent and its brand. So the next time Google announces mass hiring or a new and expensive “project” like Google glass you should rejoice! Money spent on building a brand of “excellence”, has a really high return on investment.

Refreshing brands

The food and beverage industry is filled with many “commodity businesses,” that don’t offer much different than their competitors. These business rely on winning customers by having the lowest price, which is the kiss of death for investors. But surprisingly, despite being tied to this industry, Starbucks Corporation (NASDAQ:SBUX) and The Coca-Cola Company (NYSE:KO) are two of the best brands in the world.

These companies have very different brands but they share two things in common–passionate fans and dominant “best of breed” status. Starbucks Corporation (NASDAQ:SBUX) “brand passion” starts with their iconic CEO Howard Schultz and his love for coffee, while The Coca-Cola Company (NYSE:KO)’s is lead by its loyal fan base and “secret formula” recipe.

Starbucks Corporation (NASDAQ:SBUX)’s staggering 29% return on equity is an absolutely ludicrous number for a coffee company. The company has been on an unheralded run since Schultz returned as CEO and it starts with that love and passion that he has for the product.

In 2008 Schultz ordered a worldwide shutdown of all Starbucks Corporation (NASDAQ:SBUX) stores for training. The move was criticized by many investors as it cost Starbucks Corporation (NASDAQ:SBUX) a ton of revenue. But shutting down during peak hours to work on “perfecting the art of espresso” was just the kind of message that Schultz loves to send to the market. Like Google, this company is willing to spend a little money in the short-term if it means that the market will associate it with excellence.

Some say the stock looks expensive now, but it also did at $30 and at $16. This company will always look expensive, all it does is sell coffee and tea, but you should think twice before betting against these guys.

Speaking of expensive, every quarter it seems like The Coca-Cola Company (NYSE:KO) is growing earnings and setting a new record for its stock price. Earnings for this company have grown near 10%, along with revenues, over the past five years. Even better, the dividend growth has matched earnings and revenue growth.

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