The Fragility of Brands

Brand as a competitive advantage is considered common knowledge among investors. It's not as durable of an advantage as most think.

The Oracle, George Edward Robertson, circa 1900, oil on canvas

How time flies…

When screening for stock ideas, it’s helpful to run the same screening criteria at regular intervals to see which companies (and industries) frequently appear or only show up once or twice.

One I built for this newsletter is a “Buffett screen”. It isn’t based on the common principles most people attribute to Warren Buffett, but is instead derived from a quote during the 1999 annual shareholders meeting. I had hoped to revisit this list about once every six months, but it’s now been over a year since I last visited it.

Let’s fix that.

One of the benefits of market screens is that they can not only provide a starting point for new investment ideas, but they can also teach valuable lessons about companies and industries.

One big takeaway from this current iteration? Brands aren’t as strong as you think they are.

Here are the stock screening criteria:

• Trading region of primary security: USA & Canada

• Market capitalization: Between $1 million and $10 billion

• Return on total capital over the past 12 months (TTM): greater than 15%

• Earnings before interest and taxes margin (TTM): Greater than 10%

• Price to Free cash flow: Less than 15 times

Let’s dig in.

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I will share the results from a stock screen I created using Koyfin. It is one of the many functions I find myself using daily on the Koyfin platform; It also allows me to create watchlists to track many portfolios, review a decade of financials, or compare companies on various metrics. Unleash the power of Koyfin’s platform and transform your research process by signing up for Koyfin here and receiving 10% off.

Disclaimer: I have an affiliate partnership with Koyfin and receive compensation if you sign up via the link above. It helps me fund this endeavor. I would still recommend using it even if I didn’t have this partnership because it’s an awesome product, but I’d be stupid to turn down a revenue opportunity. You get a discount, Koyfin gets new business, and I get a commission. Win-win-win)