Brands and the Stock Market

Brands are key corporate assets accounting for a significant portion of shareholder value. In 1987, the price to tangible book value of the Standard & Poor’s 500 Stock Index (S&P 500) exceeded 2 indicating that intangible assets were starting to become more valuable than the asset base reported on companies’ books. This ratio peaked at around 7 during the dotcom frenzy and stabilized after the 2008/9 market crash at 2.7 as of the end of the first half of 2009. The average price to tangible book value of the S&P 500 between 1985 and 2009 is 3.9 indicating that about 74 percent of the average long-term stock market value of all companies (including utilities, real estate, commodity and manufacturing businesses) included in the S&P 500 is generated by intangible assets such as brands, customer base, patents, organizational frameworks, and channel relationships. This is remarkable as the share price represents the NPV of all of the companies’ future expected cash flows.