What’s in a name? That which we call a rose, by any other name would smell as sweet.

That famous line from Shakespeare’s Romeo and Juliet is a poetic way of saying that nothing can be defined by its name. That name alone can’t convey identity, quality or worth.

Wall Street doesn’t see it that way.

Over the past quarter century, Ralph Lauren (NYSE: RL) has marched from $14 to $280 per share. This powerful advance has made its namesake founder a billionaire… 12 times over. Most of the credit goes to the Polo brand name. The fabric and workmanship of this apparel line may not be all that different from the competition. But as any fashion-conscious junior high kid can tell you, you pay a steep premium for that coveted horse emblem.

That’s true for most highly regarded brands. Not just Louis Vuitton and Rolex, but also Ben & Jerry’s and Frito Lay. There’s a reason why one pint of mint chocolate chip ice cream fetches $6 and another right next to it only sells for $3.

Likewise, there is a reason why an entry-level iPad might carry a price tag of $300, while a rival tablet with similar computing power and storage capacity can be picked up for maybe half that. Clearly, the Apple name carries a lot of weight with consumers.

How much? Well, Forbes and consulting agency Interbrand both answer that very question each year. They agree that Apple (NSDQ: AAPL) is the world’s most esteemed brand: with a value approaching $500 billion.

Just so we’re clear, that’s simply the value of the Apple name, not the value of Apple stock (which towers above $3.5 trillion). For context, the Apple brand is worth a cool $100 billion more than Microsoft (NSDQ: MSFT) and Amazon (NSDQ: AMZN), which rank at No. 2 and No. 3, respectively.

You can probably guess many of the other VIPs on this list: McDonalds, Disney, IBM, Visa, Netflix, Uber. Of course, their perceived value isn’t set in stone and is adjusted (up or down) annually. One of the fastest-growing is music streamer Spotify, whose brand equity increased 12% last year to $12.4 billion.

Established brands convey specific imagery and connotation. Names like Armani and Prada are synonymous with style and sophistication. Lexus and BMW attract drivers who value performance and prestige. And what woman wouldn’t want to see a Tiffany’s jewelry box under the Christmas tree?

But it’s not always about luxury and wealth.

John Deere green says reliability. And the familiar Hilton logo on an interstate exit sign means that a clean and comfortable night’s sleep is just ahead.

According to Interbrand, the average company in the Top 100 list has been in existence for 110 years. Considering businesses die every day, that suggests that durable brands are the key to longevity. The collective brand equity of these franchises topped the $3 trillion mark for the first time last year and continues to climb.

But that doesn’t make them bulletproof. Just ask former club members that are no longer around. Like AOL. Or Nokia. Leadership changes. Entire categories rise and fall. Even mighty Budweiser saw its reputation tarnished after the Bud Light fiasco.

There’s nothing particularly special about the malt, yeast, and hops in those familiar blue cans. Few can distinguish Bud Light from countless other mass-produced industrial light lagers. But marketing and branding built generations of fiercely loyal customers and earned the title “America’s best-selling beer.”

That was until an ill-considered partnership with a social media influencer drew fierce backlash from across the country, causing sales to tank. Two years later, AB Inbev is still trying to win back some of those lost customers. But the damage is done — the value of the Budweiser Brand has plummeted from $29 billion to $12 billion, sliding from No. 21 to No. 67 in the rankings.

It takes 20 years to build a reputation and five minutes to ruin it.
— Warren Buffett

Fortunately, this is the exception rather than the rule. Trusted brands that engender customer loyalty create a wide (and sometimes unassailable) economic moat, protecting returns on invested capital (RoIC) and keeping the competition at bay.

That’s more important than ever in this post-inflationary environment.

They Can’t all be Top-Shelf
Demand elasticity.

It’s one of the first things they teach you in business school. Consumer goods are sensitive to price hikes. Some more than others. In most cases, noticeable increases will deter purchases and dent sales volume. But strong brands are better able to lift prices without losing customers. They call it pricing power.

These manufacturers have the luxury of passing along rising costs — and maintaining gross margins – with minimal impact. Remember when a 12-pack of Coca-Cola cost around $5? Faced with rising costs for sugar, aluminum, and other raw materials, that price has quickly escalated to $7, or $8, or even more.

Yet, loyal customers continue to throw them in the shopping cart.

We see the same thing in the breakfast aisle. Kellogg (NYSE: KLG) gets top-dollar for top-shelf cereals such as Frosted Flakes, Froot Loops, and Rice Krispies. I just hopped over to Wal-Mart.com and found a 16-ounce box of Raisin Bran for $3.98 versus $2.76 for Great Value Raisin Bran.

Let’s be honest. This is a commoditized product. There isn’t terribly much difference between the category leader and the private-label competitor. Both contain the same basic ingredients. Yet one commands a 45% higher price.

That’s branding.

It has worked out pretty well for Kellogg shareholders. The company hasn’t missed a quarterly dividend payment since 1925.

Reputation Matters
When discussing the importance of brand strategy, Interbrand provided a sobering statistic. People on dating apps spend an average of 3.19 seconds evaluating a potential mate, someone they might spend the rest of their lives with. Not even four seconds. So how much thought could possibly go into toothpaste or dishwasher detergent.

It’s not easy for new players to make an impression… harder still to cut into the market share of an established category leader. All the more reason to give the nod to entrenched, powerful brands that have already done the heavy lifting. If you took a custom-built portfolio of Interbrand’s Top 100 each year, it would have outperformed both the S&P 500 and the MSCI World Index by a 2-1 margin since 2000.

Of course, that’s just hypothetical. But a newly launched ETF has wrapped a broad assortment of these leaders in one convenient ticker. As the name implies, the iShares Top 20 U.S. Stocks (NYSE: TOPT) holds nearly two dozen of the most profitable and recognizable businesses on the planet. These 20 companies have an aggregate market cap of $15 trillion.

Most of the portfolio is represented in the Interbrand Top 100 — including four of the top five names on the list. While there is a fair amount of overlap here with other mega-cap growth funds, this is an easy (and low-cost) way to fill a bucket with la-crème-de-la-crème.