Harley-Davidson, Inc. (HOG), Hasbro, Inc. (HAS), and How Long Lasting Brands = Long Lasting Returns

Brands and their various components such as the logos, color schemes, writing, and history create a psychological bond between a product and its consumers. History’s most enduring brands have made shareholders of the companies that own them rich over the decades.

Jerome Smucker, founder of food manufacturer The J.M. Smucker Company (NYSE:SJM), understood this fact over 100 years ago when he founded the company. When he sold products from a horse drawn wagon he wanted to back the quality of his product with a personalized signature on each jar.

Today you may associate high quality jam with the Smucker family name and harbor positive memories from eating Jif’s peanut butter and Smucker’s jelly when you were a kid.

In its more recent history, during the past five years J.M. Smucker purchased other brands such as Folger’s coffee from The Procter & Gamble Company (NYSE:PG). You may enjoy getting up in the morning to a cup of coffee with this familiar name.

As you can see in the chart below, selling products with this type of association and quality benefitted The J.M. Smucker Company (NYSE:SJM) and its shareholders greatly over the past 15 years. Revenue and free cash flow increased 9 and 21 fold respectively during that time. If you held on to J.M. Smucker’s shares thorough the dot com bubble burst at the turn of the millennium and through market corrections during the last recession you would have outpaced the market by a factor of 6.

SJM Revenue TTM data by YCharts

The future looks bright for J.M. Smucker. Expansion into international territories is starting to pay off. Net sales in its international segment have increased 35% so far this year. Coffee continues its status as the top revenue generator. As long as this company maintains its tradition of quality you shouldn’t need to worry.

Also backed by a long history, motorcycle maker Harley-Davidson, Inc. (NYSE:HOG) built an entire sub culture around its name including a merchandise line up complete with jackets, gloves, and accessories to complement your motorcycle purchase. You buy a Harley-Davidson, Inc. (NYSE:HOG) to look tough and cool and partake of rich culture.

Motorcycles represent a luxury which means they reside at the low end of everyone’s priority list of purchases translating into recession sensitivity. Still, as you can see in the chart below, despite all of the ups and downs in the global economy Harley-Davidson, Inc. (NYSE:HOG) still managed to expand revenue and free cash flow 200% and 211% respectively over the past 15 years. Total shareholder return outpaced the S&P 500 by a more than 2 to 1 margin.

HOG Revenue TTM data by YCharts

Harley-Davidson, Inc. (NYSE:HOG) has made inroads into the younger Millennial (ages 18-34) generation as its mainstay baby boomer demographic begins to age. According to Harley Davidson’s investor relations website sales to the Millennials exceed the sales to baby boomers when they resided in that age group.

Harley Davidson retains leadership in the female and minority demographics as well. Also the future for Harley-Davidson, Inc. (NYSE:HOG) relies increasingly on the international scene. Harley Davidson expects 40% of its total sales will originate internationally by 2014. The Harley Brand name resonates with the young, old, all genders and throughout the world and will continue to contribute to superior shareholder returns.

Toy maker Hasbro, Inc. (NASDAQ:HAS) also owns a long lasting product portfolio consisting of well-known brands old and new such as Transformers, G.I. Joe, Play-Doh, My Little Pony, and Magic: The Gathering. You may remember playing with these toys yourself as a kid.

Hasbro, Inc. (NASDAQ:HAS) plays on several elements to keep its most beloved product lines going. First, it plays on generational amnesia. In other words, when one generation gets too old to play with Transformers, G.I. Joe, and My Little Pony Hasbro, Inc. (NASDAQ:HAS) reinvents the “canon” for the next generation complete with new television series, movies, and toy lines. In fact you may have heard the rumor that the next Transformers movie will star new actors and actresses and will harbor a new plot line. Second, for products like Magic: The Gathering, Hasbro, Inc. (NASDAQ:HAS) plays on the camaraderie and sub-culture (much like Harley Davidson) that comes with playing the game with other people.

As you can see in the chart below the relatively short life cycles between each generation of toy lineups resulted in some choppy fundamentals over the last 15 years. However, revenue and free cash flow still expanded 32% and 4% during that time. No doubt the popularity of the recent Transformers and G.I. Joe movies boosted stock market popularity as well as serving as a catalyst to the market beating return of 128%.

HAS Revenue TTM data by YCharts

Hasbro, Inc. (NASDAQ:HAS) plans to focus more of its resources on the proven brands mentioned above spending less money on riskier new products. The next Transformers movie due in 2014 should reinvigorate that product line as well as boosting Hasbro’s top and bottom lines. In addition, it wants public involvement in the creation of a new Transformer further adding to brand likeability. You can rest assured the legacy behind its core brands will propel shareholder value for quite some time.

Consumers will continue to associate The J.M. Smucker Company (NYSE:SJM)’s with quality jelly, Harley-Davidson, Inc. (NYSE:HOG) with cool toughness, and Hasbro, Inc. (NASDAQ:HAS) with Transformers, G.I. Joe, Magic: The Gathering and My Little Pony. On the whole, consumers’ psychological affinity for these brands will propel sales growth and subsequent shareholder gains for quite some time.

The article Long Lasting Brands = Long Lasting Returns originally appeared on Fool.com is written by William Bias.

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