| Page 3 of 3 < |
A Billionaire's Brand Strategy
|
TOOLBOX
   Resize
COMMENT
 Discussion Policy
 CLOSE
Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post.
Who's Blogging  |
Even Buffett has had his share of stumbles despite his long-term record. A 2007 study by researchers at Texas A&M and Ohio universities showed that from 1980 to 2003, Berkshire Hathaway beat the Standard & Poor's 500-stock index in 20 of 24 years. Its annual return beat the index by more than 12 percent over the same period.
But in 1989, Berkshire Hathaway invested $358 million in US Air for 9.25 percent of the airline's preferred stock. In his 1996 letter to shareholders, Buffett wrote that he was "beguiled by the company's long history of profitable operations, and by the protection that ownership of a senior security seemingly offered me."
But, Buffett said, he overlooked a crucial fact: The airline industry was rapidly deregulating. This created cutthroat competition that ate into US Air's earnings even as it had to maintain a cost structure held over from a time when federal regulation protected the carrier's profit. Buffett managed to unload his US Air shares at a gain in 1998, avoiding two bankruptcies by the airline in following years, but he characterized his analysis of the airline as "superficial and wrong."
Buffett also bought into retailer Pier 1 in 2004, just after its stock peaked at more than $25 per share. He sold his stake in 2007, when the stock was trading in the single digits.
Buffett, a director of The Washington Post Co., was unavailable for comment.
As a rule, money managers say, individuals would do well to stick with brand companies that are diversified around the world, have a long record of consistent earnings and sales growth, and a history of supporting their brands. Investors should also try to stick with companies whose brands are No. 1 or 2 in most of their markets, Millen said.
The trick for investors is to buy the companies when they are out of favor because they often trade at a premium, Kaufler said. "Strong brands are rare. And it's even rarer when you can pick them up at an inexpensive price," he said.
Patience, analysts said, is important.
"Warren Buffett would say that when he goes and buys a business, he buys it with the idea that he's going to own it forever," Kaufler said.
