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How to Invest in 50 Undervalued Brands with One ETF

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  • (0:40) - Brand Value Investing Strategy
  • (3:00) - How To Find The Strongest Company Brands
  • (5:00) - BVAL Overview: Sector Breakdown, Unrealized Value and Market Cap
  • (9:30) - ACSI: Customer Satisfaction  
  • (11:45) - What's In The Future For Exponential ETFs?
  • (13:10) - Episode Roundup:

Strong brands often make for strong companies, but is there a connection between brands and stock prices as well?

Well, this week’s guest on the Dutram Report—Phil Bak, the CEO of Exponential ETFs-- believes there is a correlation between the two, and that many investors are overlooking this key factor when constructing their portfolios. This is because brand value isn’t something that is measured by most as an aspect of corporate value, despite its key role in the health of many companies. But how do you find these undervalued brands that have staying power?

How to Find Companies with Powerful Brands

One way to do it is to look at a number of key factors that go in to determining brand power, namely familiarity and favorability. It is hard to have a good brand if people aren’t familiar with you, while you want to make sure that people have a positive opinion of a given brand as well.

Combining these factors gets you an idea of how powerful a company’s brand really is in the scheme of things, and relative to others in a sector. Phil also talks about other key aspects of finding companies with strong brands in the podcast, and how to find undervalued ones as well.

Strategy in ETF Form

Phil Bak discusses how Exponential ETFs uses a Brandometry index, the BrandTransact50 Index, in order to invest in 50 companies that have brand equity value not recognized in their share prices. This equally-weighted benchmark doesn’t just invest in a bunch of companies with strong brands though, as it looks to find firms that have unrealized brand value relative to market cap.

This is a key distinction, and it is what gives the ETF that follows this approach, the Brand Value ETF (BVAL - Free Report) , a unique standing in the market. We debate how this focus on undervalued companies impacts the portfolio, as well as some components in the fund.

In particular, we discuss some companies that you might think of when you hear the words ‘strong brands’. Sure, companies like Apple (AAPL - Free Report) and American Express (AXP - Free Report) make the cut, but so do ones like Bloomin’ Brands (BLMN - Free Report) , which is the parent of Outback Steakhouse, as well as Dick’s Sporting Goods (DKS - Free Report) . We talk about some of the characteristics of some of these companies and what has surprised Phil from the holdings list as well.

We also talk about some of the sector and cap issues that this sort of strategy might face, as well as the idea of large caps having stronger brand names in general. Phil also goes over how this product might fit into an average investor’s portfolio if you are thinking about this strategy and like the concept.

Similar Funds from the Group?

Finally, we also discuss what is next for Exponential ETFs, and some other funds that Mr. Bak is involved with these days. In particular, we highlight the American Customer Satisfaction Core Alpha ETF (ACSI - Free Report) .

This ETF focuses on the idea that companies that do a better of satisfying their customers than their peers will outperform over time. There are some pretty obvious parallels between this approach and the brand value one, and we explore that idea as well as how some companies, such as Apple (AAPL - Free Report) , might be deriving a significant portion of their brand value from the job they do satisfying customers. But listen to the podcast for additional information on this idea and the world of brands too!

Bottom Line

But what do you think about brand value? Make sure to write us in at podcast @ or find me on Twitter @EricDutram to give us your thoughts on this, or anything else in the fund market.

But for more news and discussion regarding the world of investing, make sure to be on the lookout for the next edition of the Dutram Report (each and every Thursday!) and check out the many other great Zacks podcasts as well!

And for additional insights from the Exponential ETFs team, check out our earlier podcast the group that focuses on their customer satisfaction ETF, ACSI:

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