3 Stocks That Inspire Brand Loyalty Like Apple
How often do you see a corporation's logo proudly emblazoned on a bumper sticker? Or a worldwide outpouring of emotion over a CEO's death? Or people lined up by the hundreds, ready and eager to spend their hard-earned cash for a company's latest product?
Not very often, I'd wager. I'm talking, of course, about Apple (NAS: AAPL) , which continues to have strong year-over-year revenue and profit growth despite having a very reasonable valuation -- along with a huge war chest of cash. Companies that inspire this kind of fierce dedication are apt to perform well in both good times and bad. Following are three corporations that inspire loyalty in the Apple tradition, along with a look at how each is currently doing:
1. H.J. Heinz (NYS: HNZ)
Having grown up in Pittsburgh -- Heinz's corporate and spiritual home -- there's still only one brand of ketchup for me, and mustard, and pickles, and ... you get the point. Heinz is a well-defended household name, sacred not just to me but to consumers around the globe.
Just like Apple, when you inspire this kind of brand loyalty, people will pay up for the real thing rather than going generic, even in tough times. Let's see how my beloved Heinz is doing these days:
- Trailing-12-month profit margin is a very healthy 8.5%.
- In its most recent quarter, year-over-year quarterly revenue grew at a very nice 8.3%.
- YOY quarterly earnings, however, fell 5.7% due to "special charges ... for initiatives to improve global productivity and manufacturing efficiency." Disappointing yes, but in service of improved profits in years to come.
- The company has a little more than $900 million in cash and $5.1 billion in debt. More debt than cash is never ideal, but money is cheap right now, and a cash generator like Heinz will be able to meet its debt obligations.
The stock is trading for around $53 per share. At nearly 18, the P/E is edging up a bit, but it's still lower than Kraft's (NYS: KFT) 20. With Heinz, you're getting a lot of company for the multiple, just like dedicated consumers are getting a lot of ketchup for the money.
2. Disney (NYS: DIS)
For me, Disney was Beauty and the Beast and Aladdin. For my 3-year old son, it's Toy Story and Cars. For millions of others, it's the spare-no-expense theme parks that leave an indelible memory of all things Disney.
People get nuts about Disney like no other entertainment brand, and the company has always managed to remain firmly in the public's imagination. By the numbers, let's see exactly what the House of the Mouse is up to:
- Profit margin is a strong 11.8% TTM.
- In its most recent quarter, YOY quarterly revenue grew a healthy 7%.
- YOY quarterly earnings shot up a staggering 30.2%. Over the same period, Dreamworks Animation's (NAS: DWA) quarterly earnings shot down more than 50%.
- The company has $3.2 billion in cash and $14.3 billion in debt. As with Heinz, money is cheap right now, and Disney generates enough cash flow to easily meet its debt obligations.
The stock is trading for about $36 with a very reasonable P/E of 14.5. And now that Disney owns Marvel Studios, there's a whole new world of content to hook people in with. And the cycle continues.
3. Ford (NYS: F)
Back in the day, my father was staunchly "a Ford man." Ford owners have always come across as more passionate than Chrysler and GM (NYS: GM) owners. Again, note the popular Ford truck window sticker with the little boy, ummm, relieving himself on a GM truck.
Maybe it's being the brainchild of the great Henry Ford. Maybe it's the fact that Ford is the only American car company that didn't take bailout money. Regardless, let's see how Big F stacks up on the merits of the numbers:
- Profit margin is a reasonable 5.1%.
- YOY quarterly revenue grew at a robust 10.6% in its most recent quarter.
- Unfortunately, YOY quarterly income contracted 2.3%. We know the auto business is cyclical, and 2.3% for a company the size of Ford won't put it out of business.
- Cash on hand is a little more than $20 billion. Debt is a little more than $95 billion, although much of that comes from its finance division. The good news is, Ford is diligently paying it down.
The stock is trading at an absurd level below $11 per share, with an equally absurd P/E of 6.5. Around the globe, Ford is a sacred brand. Customers have stuck by this American car brand more than any other, through thick and thin. The company also just reinstated its dividend. Sounds like another reason for Ford people to stay Ford people.
Standing on the shoulders of Apple
Heinz, Disney, and Ford. Three companies that, each in their own way, inspire brand loyalty in the tradition of Apple, and are investments that will perform well in good times and bad. But these aren't the only stocks built to survive a bumpy market ride. Learn about five more, handpicked by our top equity analysts and actually owned by The Motley Fool, in this special free report: "5 Stocks The Motley Fool Owns -- And You Should Too." To get your copy while it's still available, click here now.
At the time this article was published Fool contributorJohn Grgurichwould like some french fries to go with his Heinz ketchup, but he owns no shares of any of the companies mentioned in this column. The Motley Fool, however, owns shares of Apple and Ford Motor.Motley Fool newsletter serviceshave recommended buying shares of General Motors, Ford, Heinz, Disney, Apple, and DreamWorks Animation, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has a scintillatingdisclosure policy.
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