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On Valentine's Day, the Wall Street Journal's Jason Zweig wrote an article about stocks and their performance immediately following the Great Depression. The results are sobering.

IN PICTURES: Eight Ways To Survive A Market Downturn

According to the Center for Research in Security Prices (CRSP), you would have lost big time if you invested in stocks at any time between 1929 and 1933. That's not surprising. What did surprise me was that investing great Benjamin Graham also lost 60% during this three-year period. Not even one of the most respected fundamental analysis investors could find relief from the carnage. The article went on to highlight industries that did well in those dark days, including logging, flat glass and oil and gas. That was then, so let's look at the now.

Complex Times

Today, we have an economy that is far more complex. To help investors understand where they might invest their savings, Zweig asked Barrie Wigmore, author of The Crash and Its Aftermath (an examination of the markets during the Great Depression) to provide some ideas where an investor might direct his or her funds today. One of his three suggestions was to invest in well-known brands with manageable debt - a smart tip, which we'll make the basis for the rest of this analysis.

Brand Value
Since 1974, global marketing consultant Interbrand has been attaching dollar values to corporate branding, creating financial assets from pictures, logos and text. They've become legendary brand experts, and every year analysts wait for the annual ranking of global brands and their financial value report they issue.

Using the 2008 report of Best Global Brands, I've pieced together a portfolio of 10 companies based in the United States that meet Interbrand's criteria for creating brand value. To be considered a great global brand, Interbrand believes a company must possess financial strength, an ability to drive consumer demand beyond the norm and a business model that ensures the continued growth of its brand well into the future: a perfectly reasonable description.

While Interbrand's 34 years of experience evaluating global brands should be enough, I'll perform a stock screen looking for companies with as little debt as possible (Wigmore's suggestion) and a return on equity above 20% to ensure there exists a margin of safety.

Although the ROE metric is usually applied to companies within the same industry, I'm using it in this instance because it sets the bar high, ensuring each company meets a minimum standard of profitability. For those that doubt this portfolio's viability, keep in mind that Warren Buffett uses both these criteria when selecting stocks. Further, most people will quickly recognize the names on the list. That's definitely a good thing in this type of market. As Barrie Wigmore points out, bigger (and conservatively financed) is definitely better. (For further reading, see Competitive Advantage Counts.) And The Winners Are
Starting with the 20 most valuable U.S.-based brands in terms of financial value and applying the two criteria above, I came up with my Top 10. Surprisingly, missing from the list is Google (Nasdaq:GOOG), normally an internet favorite. It seems Google's return on equity wasn't quite up to snuff (16.6% ROE), although its non-existent debt is awfully tempting. Despite this glaring omission, it's still an extremely attractive portfolio. A couple of the main highlights include Apple (Nasdaq:AAPL), which is by far the best performing stock of the group over the last five years, and McDonald's (NYSE:MCD), which continues to benefit from cash-strapped consumers patronizing the golden arches.

One of the best benefits of this portfolio is that it allows you to sleep at night, knowing that these giant corporations are pretty steady investments. (To learn more about ROE evaluation, see Keep Your Eyes On The ROE.)

The Top 10 Portfolio
Debt $
Debt $
Altria Group
7.0 billion
794 million
7.7 billion
2.0 billion
9.3 billion
2.1 billion
9.9 billion
Cisco Systems
6.8 billion
United Parcel Service
11.0 billion
Source: Numbers according to Yahoo!Finance as of February 17, 2009
Bottom Line
If you have the stomach to invest in markets like these, where the S&P 500 was down 39% in 2008 and 8.5% for the first six weeks of 2009, you mustn't dismiss a portfolio like the one above. History shows us that it would be a mistake.

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