Posted on October 11, 2007 by Ben Connard
We look for companies with strong balance sheets—e.g. ample cash, low debt, high assets compared to liabilities. Not included on a balance sheet are certain intangible assets we believe can be just as valuable. We look for these intangibles because the market may miss them and as a result the company trades at a discount.
Two companies we hold are great examples. Qualcomm holds patents on which the company collects a royalty and Nike has such a strong brand name it’s able to charge a premium for its products.
In Atlanta last weekend, I was able to see first hand how strong a brand name can be by taking the World of Coca-Cola tour. Most companies have to pay big money to reach a captive audience; apparently Coca-Cola is not one of them. Consumers have such a strong connection to the Coke brand they are willing to pay $15 to learn more about it. And spend even more at a gift shop.
The tour is a fun experience, featuring all sorts of exhibits to dazzle the eye and make your mouth thirst for Coke. The tour includes looks at historical Coke advertisements, Coke by the numbers, and samples of Coke brands around the world. (Our traditional formula is the best by far. Beverly, a European flavor, tastes like cough syrup.) A sample Coke bottling plant is also on display.
There is an entire room devoted to Coke in pop culture, including Andy Warhol’s work. This just drives home the point—Coke is America. In this room you can even record your stories about the first time you drank a Coke. I remember it like yesterday.
The best part about the tour was a 4-D movie (not sure what the 4th D was) that included some great effects—jumping ferrets, misting bubbles and even a bug bite. The movie was about Coke’s secret formula. Throughout the tour, Coke kept mentioning its secret formula, in a determined effort to reinforce that there is only one Coke. The actors (or pitchmen) in the movie eventually discover the “secret”—Coke’s uniform flavor and quality create a consistently great taste. And as a result, Coke is the greatest beverage known to man.
I left convinced. Fifteen dollars well spent.