Apple and the Power of Brand Excitement

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The following was written by Katherine Gardner, a 2011 Motley Fool summer intern.

"Everyone jus loves ipods and itunes and I think he apple computers are so cool."

How many times have you heard this statement (granted, with the correct spelling) from your spouse, your children, or your co-workers?

I've certainly heard it -- and I've said it. Apple (NAS: AAPL) was my ninth pick on Motley Fool CAPS, and the line above was my pitch. But before you start judging my spelling, financial understanding, overall quality of education, and authority to write this article -- I wrote the pitch when I was 13 years old. Since then, my typing has improved.

So has my score: I stand as the #3 leader of Apple on CAPS, with an overall return of 589.72%. But what hasn't changed is the sentiment Apple inspires -- the butterflies-in-your-stomach thought of a brand-new iProduct.

To me, that's the fun of Apple. The company is known for its business acumen -- the ability to build a trusted brand with far-reaching market potential. But it's also known for the bubbly feelings that the iPhone 4 and other products provide for so many owners. And those factors -- not the business-related facts on which investors focus -- most affect consumers' purchases.

Don't forget that. Since consumer buying directly drives 70% of the U.S. economy, becoming a truly great investor may have as much to do with understanding consumer behavior as with anything else.

Apple isn't the only company that creates such public buzz. Mexican restaurant Chipotle (NYS: CMG) has cooked up its own serving of attention. Who hasn't heard of its quick service, flavorful food, and focus on local and ethically sourced ingredients? The company has been accused of being overvalued for a while now, but that's not necessarily a bad thing. The stock market is fundamentally an auction market, so when everyone believes what you think, stocks can get really overvalued.

That said, while excitement about a company's product is a very strong indicator, it doesn't dictate the success of its stock. Popular doughnut chain Krispy Kreme (NYS: KKD) became known for the lines of salivating customers trailing out of its new stores. But bad business management and overexpansion in 2004 led to the bitter downfall of this sugary-sweet hookup. The stock has fallen from nearly $50 in 2003 to below $10 today. 

Recently, however, new management and a strategy to offer healthier alternatives have fueled new hope for the rebounding company. The iconic brand has endured to keep its "hot doughnuts" sign lit, but can the business create value for its owners?

While analysis of the business aspects of a stock is absolutely critical, it's hard to deny the power of brand excitement. What do an elementary-school baseball player, a teen drama queen, a hip 20-something, a stay-at-home mom, and a retired military general with a compulsive interest in bubble wrap have in common? None are exempt from the pull of an iPhone, steak burrito, or a steaming, sugary cruller.

That's the magic of these growth companies: Their products get the complete spectrum of humanity talking. Perhaps it's time to check with your 13-year-old (or your inner 13-year-old) and invest in the companies that make his or her "most wanted" list. As my dad, Motley Fool co-founder David Gardner, has suggested many times before -- Great Stocks Don't Make You Think!

With Apple's amazing recent earnings and stellar fan base, and in the face of a recent market selloff, why not take a look at it with fresh eyes? And if you want to see more of the fruitful tech stock, follow Apple on My Watchlist to get the latest updates.

At the time this article was published The Motley Fool owns shares of Apple and Chipotle Mexican Grill.Motley Fool newsletter serviceshave recommended buying shares of Apple and Chipotle Mexican Grill, and creating a iron condor position in Chipotle Mexican Grill, and a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days.Fool intern Katherine Gardner owns shares of Apple. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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