Warren Buffett has famously invested in some of America’s greatest brands. He’s famously held large long positions in companies like Coca Cola (KO), Anheuser-Busch (BUD), and Nike (NKE). Part of the allure of these companies lies in the fact that people identify with the brands. Some companies build an entire culture around their brand. Buffett has always loved companies like these, for obvious reasons. The brand itself carries enormous value, because people can identify with it. It’s the reason some people collect things that say Coca Cola on them, or refuse to drink any beer not brewed by Anheuser Busch (or someone else), or refuse to buy shoes that aren’t Nike, or New Balance, or whatever. The point is that people identify with particular brands and form loyalties to them. This is a large part of these companies’ competitive advantages, and it’s the reason companies put their emblems on racecars and vie for particular celebrities to endorse their products. Those things help form the image associated with a particular brand. Hard working athletes drink Gatorade, beautiful women can’t resist the smell of Axe body spray, Verizon has an army of people working to make sure you always have reception, etc.
Warren Buffett has his own brand as well – one built on honesty, patience, and excellence. He is, in large part, the reason that investors in Berkshire Hathaway (BRK-B) come from all over the world to visit Omaha for the annual shareholder’s meeting. He’s the star attraction at capitalism’s version of Woodstock. Bloggers build brands, too. It’s the reason people send us books to review or request to advertise on our sites. It’s because at some point, your brand may have some credibility with some of your readers, and that credibility brings the ability to influence behavior.
Today Mr. Buffett invested $300 million in unsecured notes issued by Harley Davidson (great ticker symbol – HOG), a brand that has a famous culture associated it. People who ride Harley Davidson’s aren’t just loyal to the brand – it’s part of their lifestyle. They wear Harley clothes, they’re friends with other Harley owners, and they’d feel humiliated riding a bike made by another company. It’s a typical Buffett-esque company. Of course, Buffett’s investment in HOG isn’t the same vote of confidence as an equity investment would have been, and Buffett did get great terms – a 15% annual interest rate. Nevertheless, Harley shares gained 15.77% on Buffett’s perceived vote of confidence. At least one blogger sees this as an opportunity to short HOG shares. That may be the case, but my bet is that HOG sticks around long enough for Buffett to get his money. Like his investments earlier this year in General Electric (GE) and Goldman Sachs (GS), Buffett used the power of his brand to land preferential terms.
In other Buffett news, it was also reported today that he upped his stake in Burlington Northern (BNI). He continues adding to this position. He mentioned at the shareholders meeting in 2007 that he feels that the competitive moat of the railroad companies is getting wider. He likes this railroad in particular. I read the scoop at this cleverly titled blog. Hundreds of other investors will continue to buy BNI on the strength of Buffett’s endorsement. The loyalty of that following is a good indicator of how strong Buffett’s brand really is. Thanks for reading.
Related posts:
- Buffett and Goldman Team Up to Help Small Business I hear and see a lot of conspiracy theories out...
Related posts brought to you by Yet Another Related Posts Plugin.
{ 2 comments… read them below or add one }
Great post, i didn’t really think of Warren Buffet this way. But it does paint a great example for all us and the importance of setting a brand.
One important thing is to try whatever feels right for you, sure you may fail a few times but its all part of the process.
Really good post.It is the true fact that women like axe spray.But it does’t mean that it will alone help in impressing the lady.