The Motley Fool

Why brand power is what I look for in an ASX share

Investors love to point at all sorts of metrics when discussing whether an ASX share is worth buying. From earnings per share to revenue growth, from dividend yield to price-to-earnings ratio… there’s no shortage of ways to justify a ‘good stock pick’ using numbers.

But I’m more of a minimalist when it comes to investing – and there’s nothing I look to more than simply the power of a good brand.

Step back for a minute and think about the largest companies in the world – Apple, Amazon and Microsoft. Thinking about all 3 of these companies conjures up a reputation of quality goods and services – whether that’s a shiny new iPhone or one-day delivery.

Everyone has reasonably high expectations when they use one of these companies’ products or services, and these expectations are usually met – giving the company an advantage over any potential competitors.

So where can you look for this kind of quality on the ASX?

As an example, I myself own shares of Telstra Corporation Ltd (ASX: TLS). Not for the company’s stellar balance sheet, but because I personally think it has a superior brand to its competitors and thus will continue to dominate the Aussie telco sector.

I have been attracted to Afterpay Ltd (ASX: APT) for similar reasons – the company has succeeded in turning its service into a verb, after all.

Premier Investments Ltd (ASX: PMV) is another stock that I think shows signs of a branding competitive advantage. Its Smiggle and Peter Alexander stores offer a unique experience that have clearly resonated with customers.

On the other side of the aisle, financials like Westpac Banking Corp (ASX: WBC) and AMP Ltd (ASX: AMP) have been clearly struggling due in no small part to the massive damage their brands have taken as a result of their past actions. This will likely take years to recover from, and thus I’m not really interested in their shares for my own portfolio.

Foolish takeaway

In my opinion, a company’s brand reputation is one of the best things to look at when analysing ASX stocks for your own portfolio. It’s an often-underappreciated facet of a stock, and one that if picked up early, can be quite lucrative. Just ask any early investor in Afterpay!

These 3 stocks could be the next big movers in 2020

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.

*Returns as of 6/8/2020

Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited and Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Related Articles...

Latest posts by Sebastian Bowen (see all)