Companies with globally recognized brands are usually ones that reward investors with strong earnings growth and dividends for decades on end. I'm sure you can think of many such brands off the top of your head. However, to create lasting shareholder returns, these companies must also have visionary leadership and wide competitive moats in order to stay ahead of their rivals. Below, three Motley Fool contributors outline why Starbucks , Amazon , and Coca-Cola are the type of big-brand stocks that investors can comfortably own for the next 20 years.
Tamara Walsh (Starbucks): As far as global branding recognition goes, it doesn't get much better than Starbucks. The specialty coffee retailer currently has more than 23,000 stores worldwide. Thanks to its massive global footprint, Starbucks generates loads of free cash flow. This will help it reward shareholders for decades to come.
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Starbucks once again delivered record results when it reported its fourth-quarter and fiscal 2015 earnings on Oct. 29. The java giant posted an 18% spike in Q4 net revenue to $4.9 billion. More people visited Starbucks stores during the quarter, which helped push global comparable-store sales up as much as 8% in the quarter. Comparable-store sales are a particularly important statistic for a retailer such as Starbucks because they give investors an idea of the operational health of the business at existing locations.
On top of this, Starbucks has a huge lead over its rivals in the mobile and digital space. Its Mobile Order & Pay initiative, which enables guests to skip in-store lines by placing their orders in advance on their smartphones, is already available in more than 7,400 Starbucks locations nationwide. The company is now in the process of rolling out its digital offerings in hundreds of stores throughout the U.K. and Canada. These initiatives should fuel future revenue growth by significantly increasing mobile payment transactions in Starbucks stores.
These things -- backed by with people's love of its brand -- make Starbucks a winning long-term investment.
Dan Kline (Amazon):For years, AmazonCEO Jeff Bezos been criticized for investing too heavily in the future at the expense of short-term profits.
Those investments, however, make the stock ideal for people looking to buy and hold for the very long term. The online retail leader has invested in the infrastructure it needs to compete going forward. For example, it has built an impressive network of warehouses in 28 states. Those facilities are staffed in part by robots developed by the company after it acquired Kiva for $775 million in 2012.
Buying the whole company, not just its robots, was a sensible investment that gives Amazon an advantage over its rivals. If another major retailer wants the technology, it will either have to license it (if Amazon will do that) or develop its own. The same is true for any potential online retailer looking to compete. It would have to make a huge infrastructure investment to match Amazon's efficiencies.
That's a powerful barrier to entry that greatly limits the number of companies that can compete with the online retail leader.
Amazon has built up similar advantages with its Prime program, and by developing its tablet and Fire digital-streaming boxes. There's no reason to believe it won't maintain its lead by being a big spender/early adopter when it comes to drone-based delivery.
The company won't stop investing (at least as long as Bezos is in charge), and that will at times impact profitability. But Amazon is not a quarter-by-quarter play, it's a long-term buy-and-hold stock that will have periods of great profitability driven by its periods of investment.
Anders Bylund (Coca-Cola):A rose by any other name would smell as sweet, right? Presumably, sugary soft drinks should also be easily interchangeable like the commodities they are. So in Shakespeare's eyes, Coca-Cola would be worth about as much as the sweetened water it was built on.
Image Source: Coca-Cola.
But then, the famous quote he put into Juliet's mouth is hardly the only applicable sentiment to this subject to come from the Bard. In Richard II, he wrote that a spotless reputation is the purest treasure a mortal can gain. And from that perspective, Coke is certainly making the most of its gilded veneer: The Coca-Cola brand is a true treasure.
The Millward Brown BrandZ survey lists Coca-Cola as the eighth-most-valuable corporate brand in the world today. In the market research firm's opinion, that name and its associated imagery are worth about $84 billion. That's nearly half of Coca-Cola's $183 billion market cap.
Compare and contrast this with PepsiCo. Despite a spirited marketing blitz carried out over several decades, Pepsi's brand portfolio is assessed at just $13 billion in Millward Brown's survey. Assuming that the experts are in the right ballpark, Pepsi derives just 9% of its business value from branding power.
Coke has been around since 1886, surviving disasters including economic depressions, two world wars, and New Coke. The soda giant always comes back swinging, and it's hard to come up with a company I'd trust more with my retirement cash for the next several decades. Coca-Cola may not soar sky-high from its already elevated platform, but it's about as stable as Fort Knox.
And the masterfully crafted brand image plays a huge part in Coca-Cola's longevity. A rose by any other name just tastes different.
The article 3 Big-Brand Stocks to Own for the Next 20 Years originally appeared on Fool.com.
Anders Bylund has the following options: short January 2016 $320 puts on Amazon.com and long January 2016 $320 calls on Amazon.com. Daniel Kline has no position in any stocks mentioned. Tamara Rutter owns shares of Amazon.com, PepsiCo, and Starbucks. The Motley Fool owns shares of and recommends Amazon.com, PepsiCo, and Starbucks. The Motley Fool has the following options: long January 2016 $37 calls on Coca-Cola, short January 2016 $43 calls on Coca-Cola, and short January 2016 $37 puts on Coca-Cola. The Motley Fool recommends Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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