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The Biggest Brands

THE MOTLEY FOOL
Ask the Fool

Published: September 26, 2023

Q. What are the world's biggest brands? -- S.G., Columbus, Indiana
A. Different organizations publish rankings of brand values regularly, with results that can vary due to different approaches and weightings.
According to Interbrand, one well-respected brand consultancy, these were the Top 10 global brands of 2022 and their values: 1) Apple, $482 billion; 2) Microsoft, $278 billion; 3) Amazon, $275 billion; 4) Google, $252 billion; 5) Samsung, $88 billion; 6) Toyota, $60 billion; 7) Coca-Cola, $57.5 billion; 8) Mercedes-Benz, $56 billion; 9) Disney, $50 billion; 10) Nike, $50 billion.
It's interesting to see how rankings change over time. In Interbrand's 2022 list, for example, Instagram's brand value of $36.5 billion was up 14% year over year, while Facebook's $34.5 billion value was down 5%.
Q. If I own 1% of a company's stock and it earns $100 million, do I receive 1% of that -- $1 million? -- D.E., Erie, Pennsylvania
A. Not exactly. If you own shares of a public company, you do own a portion of it -- typically a very small one, though. (For example, if you own 600 shares of Boeing, that's only a tiny piece of the roughly 600 million shares it recently had outstanding.)
When companies report their earnings, they don't distribute them all immediately to shareholders. Instead, they may spend some to further their growth -- by hiring more workers or buying more advertising, perhaps -- or to pay down debt, among other options. Many companies will reward shareholders by paying some of their earnings out as dividends, or by repurchasing (essentially retiring) some shares, which makes existing shares more valuable.
Even if a company reinvests all its earnings in growth, shareholders can profit -- because as the business becomes more valuable, so, typically, does its stock.
Fool's School
Homes Not Always the Best Investments
If you're thinking of your home as an investment, think again. Yes, homes have value and money can be made when they're sold, but you shouldn't count on that. Here are some things to think about regarding homes and investments.
For starters, it typically takes a long time to build wealth with real estate. There certainly have been times when property values have risen sharply, but in general, over the long run, homes don't appreciate rapidly. For example, over the 35 years from January 1988 to January 2023, the S&P/Case-Shiller U.S. National Home Price Index averaged annual gains of 4.2%, while the S&P 500 index of the biggest stocks in the American market averaged gains of 8.2%.
But let's imagine that your home is suddenly worth much more. Then what? You might sell it for a big gain, but you'd still need a place to live. Rather than move into a smaller, cheaper home, you'd probably want at least a similar place -- and if your home rose sharply in value, other homes in your area probably did, too. Will you just trade your current mortgage for another?
If you're thinking of your home as part of your investment portfolio and you need to get some cash out of it, that can be hard, too. Selling a home can take months -- and you may not get the price you want, especially if it's a buyer's market. You can't just sell a fifth of your home, either, if you need money but don't want to move. You could borrow against it, but then you'd have more debt.
Investments in the stock market are likely to grow faster than real estate. The stock market has averaged annual gains of around 10% over long periods. Stocks are also more liquid; if you need cash, you can sell some shares of stock without taking on debt.
So go ahead and own a home, and enjoy it. But to more effectively build wealth, consider alternatives such as the stock market.
My Dumbest Investment
A Penny Stock Win
My dumbest investment move happened in 1975, when I overheard a conversation between two friends about a promising stock that was "going to be big." I didn't have any money, so I didn't buy any shares. It was Apple Computer.
Fast-forward to 1995, when another friend told me about a promising stock. Remembering my missed opportunity, I bought 300 shares at $0.34 apiece, despite a broker warning me that it was a "penny stock" and therefore a bad investment. That stake was worth nearly $5,000 some five years later. -- P.S., online
The Fool responds: You did well, but your broker was right to warn you about penny stocks -- those trading for less than about $5 per share. They're sometimes referred to as "microcaps," as they often have market values less than $300 million, or even "nanocaps," if they're valued below $50 million. Penny stocks are notoriously risky and can often be easily manipulated by scammers.
Researchers studying the performance from 2001 to 2010 of more than 10,000 over-the-counter ("OTC") stocks, most of which were penny stocks, found that the median annual return was ... negative 37%. Yikes!
You were lucky to end up with a solid gain. Although you missed out on Apple, remember that no one knew then how big Apple would grow -- and there were periods between then and now when it didn't look promising at all.
Foolish Trivia
Name That Company
I trace my roots back to 1874, when I was incorporated in Baltimore as the American District Telegraph company. I built the first security system network for homes, and in my early years, I employed men to make the rounds of customer homes each night, checking for trouble. I pioneered always-on central monitoring systems, automated burglar systems and automated fire alarm systems. Today, with a recent market value near $6 billion and more than 17,000 staffers, I serve more than 6 million customers. I'm growing in the arena of residential solar energy, too, via my Sunpro business. Who am I?
Last Week's Trivia Answer
I trace my roots back to 1947, when my founder launched a chemical company in Korea called Lucky. In 1958, he debuted an electronics company called Goldstar. Throughout my history, I've made and sold everything from toothpaste and face cream to radios, televisions and much more. My slogan is "Life's Good." Today I'm a major holding company, with subsidiaries specializing in electronics, video displays, chemicals and energy, among other things. I employ more than 280,000 people in more than 60 countries, and my businesses generate around $150 billion in annual revenue. I helped modernize South Korea. Who am I? (Answer: LG Corp.)
The Motley Fool Take
A 7.8% Dividend To Consider
Verizon Communications (NYSE: VZ) recently reported mixed second-quarter results. Net income fell 10% year over year and revenue slipped 3.5%. But with some help from pricing increases, the company's wireless segment revenue grew 3.8%, and the broadband business is showing potential.
Progress for Verizon's fixed wireless service was particularly strong, and it looks like there's room for continued expansion. Through high-speed 5G offerings for homes and businesses, Verizon has been able to make its broadband services available in areas that are otherwise dominated by regional monopoly providers of wired internet. By the end of 2025, it expects to have between 4 million and 5 million fixed wireless subscribers -- up from its current base of 2.3 million.
A key attraction for investors is the company's dividend, which recently yielded a fat 7.8%. Verizon faces competition and is carrying a lot of debt, but it's also generating billions of dollars in free cash flow that can help pay down debt while supporting its dividend. The stock also seems undervalued, with a recent forward-looking price-to-earnings (P/E) ratio around 7.1 -- well below its five-year average of 10.6. (The Motley Fool has recommended Verizon Communications.)
COPYRIGHT 2023 THE MOTLEY FOOL, DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION, 1130 Walnut, Kansas City, MO 64106; 816-581-7500.


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