Many investors seek “moats”, or key differentiators that keep competitors at a distance. These “high-quality stocks” not seldom trade at premium valuations. At least for as long as this superior status is perceived. One such edge can be a brand. Well-known names create a barrier which in the best case even keeps new entrants out of the game entirely. However, it is no secret that brands come and go. Are we seeing another washout where once thought-to-be indispensable names are struggling for a reason? All my paid members receive my latest stock idea. It is a company with a strong market position where the brand name is irrelevant, for most even unknown.

Summary and key takeaways from today’s Weekly
– Brands are often said to offer a strong moat for companies.
– I have some doubts, and believe more in the concept of life cycles which include companies.
– From my view, brands work until they don’t – currently, it seems, many brands are falling out of favor.

In general, I like the idea of owning stocks of companies with an edge.

When not necessarily a special-situation setup like a break up, or last year’s presidential election in the US, I am presenting to my paid members stock ideas where the discussed company has some sort of a competitive advantage.

This can be patents, best-in-class drugs, established supplier and customer relationships, technological know-how, scale and cost advantages, a strong balance sheet, market leadership – or brands, today’s topic.

History is a great teacher for many things.

Personally, I am a believer in cycles. Not just market cycles, but cycles in life in various aspects and forms. In an older article (see here), I had briefly written about companies having life cycles, too. Back then, my focus was more on technology.

Today, I am looking at this topic through the lens of brands. Because many stocks which were once seen as perpetual money makers for their investors have “suddenly” disappointed their fans, I see the need to discuss this topic.

All my paid members later today will receive my latest stock idea.

I am discussing a practically unknown market leader for everyday essentials. However, the brand name is even irrelevant, shielding the company from any brand erosion that seems to be affecting one or the other name today. My pick has not only gained market share, there’s even a company-specific catalyst: the reinstatement of the dividend later this year.

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^{both as per 30 July 2025 market close – since August 2022}

Cyclical or structural issues?

Before we dive into today’s struggling names, it’s time for a bit of nostalgia.

Even though we no longer use their products or visit their stores, most of the following names likely still spark recognition in our minds:

• Kodak: Synonymous with photography for over a century.
• Blockbuster: The go-to video rental chain in the 1990s.
• Woolworths: A pioneer of the five-and-dime store since 1879.
• Pan Am: Once the world’s most recognized airline.
• Compaq: A leading PC manufacturer in the 1990s, and the largest supplier of personal computers.
• Toys R Us: A beloved toy retailer for generations (including me).
• Sears: An American retail giant and household name for over a century, known as the “everything store”. The amazon of our grand-(grand-) parents.
• Saab: A Swedish automotive giant known for quirky, innovative cars like the 900 Turbo.
• Nokia: Likely does not need an introduction, but Finland’s Nokia dominated the mobile phone market in the late 1990s and early 2000s, after having diversified from among others rubber boots.
• Blackberry: The same for business, but shorter lifespan.
• Yahoo: Once the biggest search engine.
• Tchibo: German retail chain Tchibo was huge in the 1980s and 1990s for coffee and diverse consumer / kitchen goods sold in cozy stores.
• Quelle: A German catalog retail titan, Quelle was a leader in mail-order shopping across Europe from the 1920s onward.

The list could go on and on. But I think my point is clear.

Our ancestors could never have imagined that these iconic names, at the height of their prominence, would one day cease to exist in their original form.

The reasons are manifold. Compaq for example was bought by HP (ISIN: US40434L1052, Ticker: HPQ), Nokia and Blackberry were outcompeted by Apple (ISIN: US0378331005, Ticker: AAPL) and Android phones, and many retail stores were sent into oblivion due to the rise of the internet and online shopping.

Interestingly, Apple itself was on the brink of complete failure multiple times but managed to stage remarkable comebacks.

Today, numerous well-known names with long histories and track records are struggling to maintain their former dominance.

It can be due to temporary weakness (cyclical) or a structural decline.

If you catch a cyclical low, congrats. However, fishing for structurally declining names, can be a truly unnerving and painful adventure. Frankly, often it is not even evident from the very beginning which cases belong to which group. But it is paramount to be open-minded, not lying to oneself.

Especially in those cases, where one is invested, the risk for self deception is high.

From my observations, many investors view the struggles of currently challenged companies as cyclical downturns rather than existential threats. Self-explanatory, it seems every stock that is falling is seen as a great “buy-the-dip” opportunity.

While I personally do not believe to have created here a list of soon-to-be-dead companies, I am sure that most of these names will go through a tough time. Concretely, I view their stocks as poor investments due to high valuations and company- or sector-specific issues that will likely keep them busy restructuring and reorganizing for the time being.

In the last weeks and months, for example I had discussed alcohol stocks. These cases for me seem to be more structural breaks and shifts, not just “stupid Mr. Market” cases. Companies like Brown-Forman (ISIN: US1156372096, Ticker: BF.B) or Pernod-Ricard (ISIN: FR0000120693, Ticker: RI) on one side are dealing with tariff issues, given. But there’s no denying they’ve been struggling before that.

The main issue is that volumes have started to fall. Their best ideas are price hikes which are not necessarily applauded by customers.

It is key to differentiate between temporary and structural issues.

Which doesn’t mean that I could not get interested at some point. When gloom and doom starts to be priced into these stocks, why not taking a sip? But certainly not when there’s still much growth expected.

Practically the same can be said about PepsiCo (ISIN: US7134481081, Ticker: PEP).

While I have featured this name already twice (see here and here), there’s something I wanted to add now to make my point entirely clear.

From the first chart we can see that Pepsi is so popular and such a strong brand that they lost their number two spot (some already call this the first loser) in the US. While Coca-Cola (ISIN: US1912161007, Ticker: KO) being at the top might not be such a big surprise, it is refreshing to see Dr. Pepper and even Sprite (belongs to Coca-Cola) having overtaken Pepsi.

I have another one, as PepsiCo is primarily a snacking business.

This time, we can see that PepsiCo’s volumes (their entire portfolio of drinks and snacks) has been going through a painful period of declining volumes since Q3 2022.

Management’s best idea was to aggressively hike prices. Otherwise the business results would have cratered.

“But Coca-Cola is relying on the same strategy” – right?

Not exactly. They have hiked prices aggressively either, but volumes have been holding up much better, leaving no doubt which brand is more appealing.

Now honestly, how can one assume PepsiCo is a healthy company, with sound fundamentals, a top-notch management where it’s the fault of Mr. Market, not being able to see the hidden value inside of this gem?

Unlike in my prior articles, I haven’t addressed the big debt pile and valuation concerns here. These come on top for a holistic assessment.

I am leaving the answer open.

The same, but a bit shorter now, can be said about Nike (ISIN: US6541061031, Ticker: NKE) and Starbucks (ISIN: US8552441094, Ticker: SBUX).

Nike is well-known by now for having lost market share to competitors like Skechers (ISIN: US8305661055, Ticker: SKX), arch-rival adidas (ISIN: DE000A1EWWW0, Ticker: ADS) or ON Holding (ISIN: CH1134540470, Ticker: ONON).

A quick look at sales growth rates (Nike in blue) is telling much more than just shouting out “Nike stock has fallen too much, it is a strong buy and must rise now”.

This doesn’t mean this trend cannot reverse. It can.

But “the trend is your friend”, as they say. If the setup is paired with a still lofty valuation where a recovery is fully priced in and expected, there’s no reason to follow the herd. It must be more to it than just an unjustified stock decline.

The same with Starbucks. Sales are not growing.

At the same time, the company is expanding and opening new stores in full swing. This costs money and requires huge capex.

Capex has not only grown due to store expansion, but it is part of it. And I will show below why this is important to have an eye on.

Per Q1 2024, Starbucks had 38,587 stores. Per last count in April (Starbucks posted new results a day after I wrote this article), it was 40,789 stores. A plus of 5.7%.

I’ll better let the next chart speak.

However, this is a great way to cover up the internal issues.

On a comparable basis (same store count), the figures do not look so rosy.

The last column “average ticket” reads like a glimmer of hope. But this was not customers consuming more. It was aggressive price hikes against falling demand.

Since 2020, average Starbucks coffee prices have increased modestly by 49%.

If you then consider this stock is trading at a forward PE ratio of almost 40x (not counting the not-low debt), this hardly turns out to be a high-conviction buy.

Not to mention that a dividend cut might be brewing.

Two last examples I want to briefly fly over: cigarettes and luxury.

In the case of cigs, we have Marlboro as the premium brand on one side, and certain non-premium, or value brands like West, Davidoff, and Gauloises, offered by Imperial Brands (ISIN: GB0004544929, Ticker: IMB).

In the US, Marlboro has been steadily losing market share. Imperial Brands, too, has seen falling volumes. But less so than Marlboro with the result that market share has increased for Imperial.

These were the most recent figures at the start of this week, but it has been a trend for multiple years already. Interestingly, Altria in its latest earnings posted this here:

Marlboro – THE cigarette brand – continues to lose market share, and the previously declining discount segment of Altria suddenly has caught a bid.

But unlike in the cases of PepsiCo, Nike, and Starbucks, before, here the reason for me is a bit different. Consumers are addicted and need to buy. In the other cases, they can easily postpone or cancel purchases altogether, for whichever reason. With inflation and high prices, a commoditized product like a pack of cigarettes makes the choice relatively easy to save a few bucks.

People don’t care about the brand of Marlboro.

Last case, luxury. There are some extremely struggling candidates like Kering (ISIN: FR0000121485, Ticker: KER), but I want to use the world’s biggest luxury conglomerate: LVMH (ISIN: FR0000121014, Ticker: MC).

The stock has lost about 50% from its high. Not too long ago, it was almost a conspiracy theory to assume the stock could fall at all. I have seen so many posts that this is a must-have, recession-proof, buy-and-tuck-away name where nothing can go wrong. The “rich” don’t know crises anyhow.

It turned out to be different.

The chart shows only a part of the entire conglomerate, but it is representative.

I don’t think that luxury goods will never be bought again. Likewise, I assume LVMH will continue in some shape or form. Maybe, they will sell or spin-off some underperforming brands or even entire divisions.

But there’s no denying that the cycle is currently on its way down.

My bottom line for this Weekly is brand values are something highly subjective. This might not be very surprising. For example the brand of Google has absolutely no value to me personally, as I am not using Google. But it has value for others.

What seems to be working, though, is that brand values correlate with the wellbeing of the economy, and the disposable income of the people. On top, we need to mix in that certain brands simply just fall out of favor. They can come back, no question. But one should not assume solely based on the past that every case with falling share prices is just a temporary correction.

It was not my aim to present a selection of companies and brands that will go out of business soon. I don’t know that. And I even do not need to know.

I wanted to show how I analyze and think to make sure to avoid such troubled cases.

It is necessary to analyze more than just a few headline figures. And fundamentals are just one thing, the valuation should never be forgotten to spot attractive risk and reward setups.

I know that I seem to be writing certain things almost every week.

But this is why my paid members do not receive such flops that crumble by 50–70%. We have one case open in my Premium PLUS membership, where the stock had temporarily halved. But I kept the case open, because I believed and still do so, that the story isn’t finished. The fault was my too-early entry. It strongly came back after having announced a transformational partnership.

Or just a fresh example. The stock of Novo-Nordisk (ISIN: DK0062498333, Ticker: NOVOB) went up like crazy, and seemingly everyone in my twitter feed was cheering this to be a must-own stock forever.

Was it? It it possible they won’t recover their losses for years to come, maybe not even for a decade. Maybe two, who knows.

Who’d have thought Europe’s not-too-long-ago biggest company by market cap would lose two-thirds of its equity value in about twelve months, and suffer multiple 20%+ setbacks in just one trading day?

If you’re sick and tired of such flops, consider becoming a paid member.

Conclusion

Brands are often said to offer a strong moat for companies.

I have some doubts, and believe more in the concept of life cycles which include companies.

From my view, brands work until they don’t – currently, it seems, many brands are falling out of favor.

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