Is Investing In Battered-Down Iconic Brands A Good Investment Strategy?
In my endless pursuit of the best investment strategies, I have begun to take notice of some iconic brands that have been beaten down with the current bear market. The question is, is the iconic brand status of these companies enough to warrant you putting your cash into the stocks of these companies? Is the brand status of these companies enough to guarantee the eventual bounce back of the stock prices? Let’s take a look at some of America’s most iconic brands and the beaten down stocks that accompany them.
First up, the iconic coffee producer. The brand you can now see worldwide. Starbucks’ growth has come to a skidding halt, and they have recently announced massive closings of under-performing stores. This afternoon, they posted their first ever loss as a company.
One of the major problems for Starbucks is the increased competition. Dunkin Donuts, McDonalds and other competitors are now offering a full range of coffee drinks at attractive prices. The products taste great as well (Dunkin Donuts is my coffee of choice). With comparable products and attractive prices, more people are passing by Starbucks and going elsewhere.
At its current price, I say that you shouldn’t buy SBUX. I have no idea where their growth is going to come from, the economic environment is too challenging and the competition is becoming more intense for me to buy this stock.
American Express (AXP)
Next up, one of my favorite companies, American Express. I live by my AMEX cards and try to use it for every single purchase. The customer service is unmatched and I predict I will remain a customer for my entire life.
The major problem with the company is their lending business which is posting losses. Like most banks, American Express is feeling loads of pain in today’s financial crisis. However, their exposure is not as much as other banks, and much of the bad news might already be priced into the stock. Therefore, I rate this stock as a Hold or a “Maybe” Buy. This is a company I would love to own long term, so I might be willing to accept some short term weakness for the long term holding.
Also, Buffett is a large holder of the company… which brings me to the next company.
Berkshire Hathaway (BRK-A, BRK-B)
This iconic brand is more about Warren Buffett than Berkshire Hathaway, but either way let’s talk about the stock. The stock is down significantly from its highs; although, the highs were probably a little overextended. The company is heavily exposed to financials, insurance and housing which are continuing to struggle.
However, the company is very diversified and best of all, their balance sheet is rock solid. They are extremely conservative in their investment style and obviously, you can’t argue with their historic performance. While Buffet himself has argued that investors should not expect the same historic returns in the future, you have to figure the company will still perform nicely over the long term.
I’m strongly considering picking up a share or two of “baby Berk” also known as the B shares (BRK-B). The A shares are too rich for this 20-something.