How to Beat the S&P 500 by 400%

"Maximum growth and high ideals are not incompatible. They're inseparable."

So states marketing guru Jim Stengel in his new book, Grow: How Ideals Power Growth and Profits at the World's Greatest Companies. Stengel spent seven years as chief marketing officer at Procter & Gamble (NYS: PG) , managing the world's biggest marketing budget and overseeing the revitalization of such halcyon but then-troubled brands as Jif, Cover Girl, and Pampers.

Stengel's book posits that "a brand ideal" must be at the core of every business. This is "not social responsibility or altruism," he argues, "but a program for profit and growth based on improving people's lives." Stengel backs up his rhetoric with data from a 10-year study of more than 50,000 global brands, from which comes "The Stengel 50." Of the 50 companies he chose, 42 are publicly traded and, as a group, have returned nearly 400% in a decade largely flat for the S&P 500.

Last month, we looked at three of those 50. Here are three more -- each having at its core a brand ideal that touches at least one of the five fundamental human values Stengel deems necessary for a brand's success,

1. Procter & Gamble
The fundamental human value this consumer-products powerhouse touches on, the Pampers brand in particular, is "inspiring exploration," which Stengel defines as "helping people explore new horizons and new experiences."

How does this relate to diapers -- one of the most prosaic, practical, get-the-job-done products ever made? Per Stengel, "Pampers exists to help mothers care for their babies' and toddlers' healthy development." So Pampers is brilliantly positioned as more than just something to catch your child's waste products. Pampers diapers are instead a vital part of the continuing well-being of your child -- i.e., that thing you strap around your baby or toddler's midsection several times a day suddenly becomes an extension of your love as a parent.

That's a lot of emotional weight a throwaway item has to carry, but that's what makes the brand ideal so important to a company. P&G makes a lot of different products, but few are as beloved and celebrated as Pampers -- part of the reason why, from the beginning of 2001 to the end of 2010, P&G shares posted a return of 72%.

2. Diageo (NYS: DEO)
The fundamental human value this spirits giant touches on, the Johnnie Walker brand in particular, is "inspiring exploration," which Stengel defines as "helping people explore new horizons and new experiences."

Johnnie Walker is one of the best-known whisky brands in the world. Almost two centuries old, the brand has never really lost its cachet and position as a status symbol. The distinctive square bottles can be easily recognized across the bar or restaurant, so everyone knows exactly what it is you're drinking. And the company produces a range of whiskies, from the well-respected red label to the exclusive and universally revered blue label -- another way to tell people exactly what it is you're drinking and how far you've come in the world.

Per Stengel, Johnnie Walker "exists to celebrate journeys of progress and success." So after you've gone out, climbed that mountain, gotten that degree, or just rung the opening bell at the New York Stock Exchange, what better way to celebrate than to knock back a dram or two of one of the world's most celebrated Scotch whiskies? Diageo makes a lot of spirits, but Johnnie Walker is one of its flagship brands, helping the company post a stock market return of 89% from the beginning of 2001 to the end of 2010.

3. Unilever (NYS: UL)
The fundamental human value this other consumer-products powerhouse touches on, in particular the Dove brand, is "impacting society," which is "affecting society broadly, including by challenging the status quo and redefining categories."

Per Stengel, Dove's brand ideal is to "celebrate every woman's unique beauty." The brand is really up to something very noble, and also very challenging, here. Rather than holding up a beauty ideal and asking customers to strive for it, Dove is asking customers to be comfortable in their own skins, to hold themselves up as the beauty ideal -- that is, again as Stengel puts it, "to help bring about an evolution in how society as a whole thinks about beauty."

This brand ideal really turns the concepts and methods used in traditional advertising and marketing on their heads. It's a refreshing and beautiful approach, and it's a big part of the reason Unilever posted a 69% return from the beginning of 2001 to the end of 2010. Unilever is lucky to have the Dove brand in its stable, and it's doing a great job of managing an age-old, trusted product.

It's not too late to beat the S&P 500 by 400%
Had you invested in The Stengel 50 from 2001 to 2011, your returns would have beaten the S&P 500 by 400%. Steady, now. That's a shocking enough number to make the knees go wobbly.

Stay tuned for further dispatches on the Stengel investing philosophy, as we continue to analyze his five fundamental human values that make a brand successful and delve into the remaining companies on his list. One company not on Stengel's list, but one The Motley Fool is bullishly calling its top stock pick for 2012, can be found in our special free report, aptly titled "The Motley Fool's Top Stock for 2012." Get it while the stock is still hot.

At the time thisarticle was published Fool contributorJohn Grgurichis ready, frankly, for 400% returns on his investments, but he owns no shares of any of the companies mentioned in this column. Follow John's dispatches from the front lines of capitalism on Twitter, @TMFGrgurich. Motley Fool newsletter services have recommended buying shares of Diageo, Unilever, and Procter & Gamble. The Motley Fool has a gripping disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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