I turned on Bloomberg radio on my way to the dentist yesterday (the pandemic has apparently been good for my teeth, as it turns out). A guest was about to talk about a survey he’d done to find companies who had enhanced their brand value during covid vs. those that lost luster. The Bloomberg reporter began his introduction by declaring that he, the reporter, being a seasoned veteran of Wall Street, was well aware that brands had little role in investment evaluation.

This is where the laughing/crying comes in. How could any financial markets reporter, let alone a financial markets “veteran,” not have a clue about Warren Buffett, the most highly publicized US investor of the past half century? Buffett’s main claim to fame is his understanding, cutting edge in the 1960s-70s, of the immense value of intangible assets like brand names and distribution networks to corporate profitability.

After my surprise at how low the knowledge bar is at Bloomberg for reporters to get air time wore off, I returned to my usual thought on the current financial press information desert–that this low bar means it’s easier for us as individual investors to gather insights that are not yet in the consensus (and therefore not likely to be already incorporated in a stock’s current price).

An aside on advertising: suppose we wanted to launch a new soft drink, call it XXXX, to compete with Coca Cola (KO) worldwide. Let’s assume, as a first (too simple, but still useful) guess, that we’d need to at least match Coke’s ad spending for, say, five years to build up consumer awareness of XXXX to the level that a soda drinker might think of it as a possible alternative. The actual KO ad spend for the past five years is $20 billion. Buying the Coca Cola name for $20 billion, rather than taking the risk of building from scratch, would probably be a bargain. Therefore, I conclude, the Coca Cola brand is worth at least $20 billion.

What Buffett realized earlier than everyone else is that although this cumulative ad spending is a big plus, it’s not visible in the primary financial statements. It doesn’t appear at all on the KO balance sheet. It’s only in the income statement as a minus, as a reduction of income.