Warren Buffett Shows Some Love for World’s Most Valuable Brands
Warren Buffett once said: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that you’ll do things differently.” In the business world, a company’s reputation is reflected in its brand. A strong brand produces loyal customers and long-term profits. Considering this, it’s not too surprising that Buffett is invested in some of the world’s most valuable brands.
Brand value is a major asset. The five most valuable brands in 2014 increased their total brand worth to $441.27 billion, up nearly 8% from $409.16 billion a year earlier, according to Interbrand’s new Best Global Brands rankings. For the first time in history, two global brands have earned a brand value in excess of $100 billion. Thirteen of this year’s top 100 brands come from the tech sector.
Interbrand examines three key aspects that contribute to a brand’s value, including financial performance of branded products and services, the role the brand plays in influencing customers, and the strength the brand has in commanding a premium price or secure earnings. Interbrand’s methodology was the first of its kind to receive certification from the International Organization for Standardization, which gives creditability to the accuracy of the rankings.
Interestingly, Buffett has a significant stake in two of the top five brands. Let’s take a look at the top five most valuable brands in the world.
5. Microsoft (NASDAQ:MSFT)
Microsoft’s brand value increased 3% year-over-year to $61.15 billion in 2014. The tech giant typically receives criticism for missing major trends such as social media and mobile devices, but continues to rake in billions of dollars every year like clockwork.
A transformation is underway at Microsoft. In February, Microsoft’s board named Satya Nadella as its new CEO, replacing Steve Ballmer, who announced last year that he was stepping down. In an email to employees, Nadella said, “We must all understand and embrace what only Microsoft can contribute to the world and how we can once again change the world. I consider the job before us to be bold and more ambitious than anything we have ever done.”
Buffett has described Microsoft as an attractive company in the past. However, he says will never invest in it because of his close relationship with former Microsoft CEO and Chairman Bill Gates. Buffett believes he would come under too much scrutiny if he or his managers held a position in Microsoft.
4. International Business Machines (NYSE:IBM)
Big Blue’s brand value decreased 8% year-over-year to $72.24 billion in 2014. It was the only brand in the top five to post a decline. However, it’s still ranked as the fourth most valuable brand in the world, and well-liked by Buffett.
Berkshire Hathaway first started purchasing shares of IBM in early 2011. As of the end of June 2014, Berkshire held 70.2 million shares, worth $12.7 billion. “I can think of no major company that has had better financial management, a skill that has materially increased the gains enjoyed by IBM shareholders,” said Buffett in his 2011 annual shareholder letter. “The company has used debt wisely, made value-adding acquisitions almost exclusively for cash, and aggressively repurchased its own stock.” He added, “In the end, the success of our IBM investment will be determined primarily by its future earnings.”
3. Coca-Cola (NYSE:KO)
Despite all the technology in the world today, sometimes all people want is a nice cold drink. Coca-Cola has been a staple in the Dow Jones Industrial Average and Buffett’s portfolio for decades. The company’s brand value gained 3% year-over-year to $81.56 billion in 2014. In comparison, Pepsi’s brand value jumped 7% year-over-year to $19.12 billion this year, making it the 24th most valuable brand in the world.
Coca-Cola is widely known as one of Buffett’s favorite stocks. In fact, Buffett is on record saying he will never sell his shares in the world renowned beverage company. At the end of the second-quarter, Berkshire held 400 million shares, worth $16.9 billion.
2. Google (NASDAQ:GOOGL)
Founded in 1998, Google is the youngest company among the top five valuable brands. The Internet powerhouse grew its brand value 15% year-over-year to $107.44 billion in 2014, making it one of the fastest growing brands in the tech sector. Google is also one of two companies with brand value above $100 billion.
1. Apple (NASDAQ:AAPL)
Unsurprisingly, the world’s most valuable company by market capitalization is also the world’s most valuable brand. Apple’s brand value surged 21% year-over-year to $118.86 billion in 2014.
“Apple and Google’s meteoric rise to more than $100 billion is truly a testament to the power of brand building,” said Jez Frampton, Interbrand’s Global CEO. “These leading brands have reached new pinnacles—in terms of both their growth and in the history of Best Global Brands—by creating experiences that are seamless, contextually relevant, and increasingly based around an overarching ecosystem of integrated products and services, both physical and digital.”