With all the recent hub-bub about “Wall Street vs. Main Street,” maybe its time investors start taking stock of what Main Street wants. After all, it’s consumer demand which ultimately drives those sales numbers that seem to have been in free fall. Warren Buffett once described his philosophy of looking for businesses with “wide moats” that protect their operations. Buffett was speaking of looking for enduring competitive advantages. Normally, we think of competitive advantages as traditional economic advantages – high switching costs or cost leadership.

But, in a market where consumers are pulling back and thinking long and hard about where to spend their hard earned dollars. The firms most likely to retain and capture market share are the ones which deliver more than economic value to their customers. Companies must deliver compelling value. Value is more than just low prices or high quality. It’s perception and experience. This is why companies like Apple (AAPL), the Buckle (BKE), and Coca-Cola (KO) have been able to weather the recent recession better than competitors despite the fact that they are not discounting as aggressively or advertising as heavily (thus avoiding the Discount Death Spiral). 

Brand Week recently released their 2009 Brand Keys Customer Loyalty Engagement Index.  Fancy name aside, the study found that consumers, more than looking for low prices are conservin their wallet firepower for brands that they believe provide the highest value for the dollar. As luck would have it, a few publicly traded names came up. Nike (NKE), J. Crew (JCG), Viva (owned by Kimberly-Clark, KMB), Tylenol and Zyrtec (owned by JNJ), Estee Lauder (EL), and All State (ALL). Want to get ahead of the rebound? These will the be the Companies that emerge healthiest as demand returns. 

Full Disclosure: Author is long shares of AAPL at the time of writing. Author does not have positions in any other stocks mentioned, but positions may change at any time.

Last 5 posts by Daniel Hung

• ISIS: Technical Analysis Case Study - November 15th, 2009
• Arbitrage Opportunities in the Public Market - November 10th, 2009
• Ares Allied Merger Arb Opportunity - November 5th, 2009
• Are Apple bulls exhausted? - October 29th, 2009
• ALD from value trap to deep value - October 28th, 2009