In 2005, I bought autographs of The Beatles...
Why?
At the time, The Beatles autographs were by far the most expensive "pop" artist autographs. I could have spent less money and bought autographs from less iconic artists... For example, autographs of The Eagles were less than half the price. (The Eagles are most famous for singing "Hotel California.")
But I didn't. It's a good thing...
Signed Beatles photos are up 394% from 1997 through 2010. Today, The Beatles autographs go for around $12,000... while a set of Hotel California-era Eagles autographs are "reduced" – on sale at $450. (All these prices are from Fraser's Autographs, where I bought my Beatles autographs.)
The Beatles are THE iconic band. Fifty years from now, The Eagles may be forgotten... But The Beatles will not be forgotten. They changed rock and roll.
I'm not telling you this so you'll go out and buy Beatles autographs. I'm telling you this to make an important point about iconic names and investing...
Iconic names ALWAYS trade at a premium to the market. They always seem a little expensive, compared to the other companies in their industry.
However... right now is a moment when it is completely worth it to step up and buy the slightly more expensive name... in order to own the iconic brand.
When it comes to the stock market, "The Beatles" (the iconic brands) only trade at a tiny premium to "The Eagles."
In short, we have a crazy-good opportunity to buy the iconic brands for cheap – we can buy Beatles autographs at Eagles prices, so to speak.
In 1972, iconic brands like Coke and Disney sold for upward of 70 times earnings. Yet today, they're only at a small premium over the rest of the stock market... Take a look:
| |
1972 P/E |
2012 P/E |
| Coke |
46.4 |
19.5 |
| Johnson & Johnson |
57.1 |
13.3 |
| Disney |
71.2 |
17.3 |
| McDonald's |
71.0 |
16.5 |
| Average |
61.4 |
16.7 |
| S&P 500 Index today |
16.1 |
15.0 |
Since 1973, the four companies in the table have traded at an average premium of 51% to U.S. stocks. Today, the premium is just 22%.
This is a historically tiny "spread" over the regular names. I expect this spread will widen again – and that someone will make a lot of money when it does.
I can't tell you if that will happen in three months or three years... But I can tell you that Coca-Cola is an iconic brand... so much so that people who drink Coke only drink Pepsi when, quite frankly, there is no Coke around.
Yet Coke is only selling for a tiny premium above Pepsi, based on their price-to-earnings ratios.
Now is a time to buy the expensive stock. Now is a time to buy the "Cokes" of the world.
To many people, Coke is The Beatles, while Pepsi is The Eagles. When you have the chance to invest in "The Beatles" at "The Eagles" prices, you must take advantage of it.
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