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Tickers in this Article: YUM, AYI, FO, HBI, LTD, IBI, INET, ICON, PBH, LCUT
A "fun" portfolio was assembled approximately one year ago to this day. That portfolio was constructed with absolutely no mathematical or scientific substance, but rather with reckless abandon, hoping once more to demonstrate that portfolio construction is overrated. The result: The "brand" name portfolio beat the S&P 500 by several percentage points, which is a more positive result than most professional investors see (it's also the reason why investors are turning to exchange-traded funds in which baskets of stocks can be purchased). Perhaps PowerShares or one of the other ETF companies would be interested in licensing this fund creation method. (To read the related article, see Introducing The "Brand" Name Portfolio.)

Top Five Performers – Brand Name Portfolio
52 week Return
Relative to S&P 500
Iconix Brand Group (Nasdaq:ICON)
Internet Brands (Nasdaq:INET)
Yum Brands (NYSE:YUM)
Interline Brands (NYSE:IBI)
Limited Brands (NYSE:LTD)
Data from June 19, 2009 - June 8, 2009 based on adjusted close.

Some Great Businesses
While the holdings in this portfolio all have generic sounding names, the businesses that come with them are anything but ho-hum. Iconix Brand Group owns well-known brands Ocean Pacific, Rocawear and Joe Boxer. Its performance in the past year isn't surprising, as the company is operating a licensing business that's second-to-none, profitable and growing. Internet Brands, the only other winner in this portfolio, operates a network of online community and e-commerce websites. Its entire network gets 49.7 million monthly unique visitors. While its first quarter revenues were essentially flat, its adjusted EBITDA increased by 4% to $8.3 million from $7.9 million. Consider it a mini-version of IAC/Interactive (Nasdaq:IACI).

No explanation needed for Yum Brands. Franchising restaurant chains Taco Bell, Pizza Hut and KFC, it's easy to understand the company's success. While Interline, a direct marketer of maintenance, repair and operations products (MRO) had a tough first quarter in terms of sales and income (down 11.2% and 67% respectively), it did generate $60 million in free cash flow in Q1 and $100 million over the last six months, $60-70 million ahead of management projections. The last of the top five performers is Limited Brands, owner of lingerie powerhouse Victoria Secret. What man hasn't enjoyed flipping through the catalogs? Its same-store sales are down 7% in the first four months of the year, and so are profits, although it did manage to eke out a one-cent gain in the first quarter, four cents better than analyst estimates.

Bottom Five Performers – Brand Name Portfolio
52 week Return
Relative to S&P 500
Lifetime Brands (Nasdaq:LCUT)
Acuity Brands (NYSE:AYI)
Prestige Brand Holdings (NYSE:PBH)
Fortune Brands (NYSE:FO)
HanesBrands (NYSE:HBI)
Data from June 19, 2009 - June 8, 2009 based on adjusted close.

Down On Their Luck
Okay, so the bottom five didn't do so well this past year but that doesn't mean they can't rise to the occasion in the second half of 2009. Lifetime Brands was a small cap to begin with, and now it's even smaller. The kitchen utensil business is hurting. It seems people are eating with their fingers in these economically challenged times. The company did provide a ray of hope in its Q1 report, announcing its operating loss was 57% lower to $2.5 million. Here's to small miracles.

Prestige Brand Holdings, makers of products like "Denorex" dandruff shampoo, has a current price that provides investors upside potential. As for Fortune Brands, it's hard to bet against them. With brands like Moen faucets, Titleist golf balls and Jim Beam bourbon, despite its first quarter report showed a drop in sales in all three operating divisions and a complete disappearing act on earnings, it expects 2009 full-year earnings per share of $2.00-2.50. Even at the low-end of the range, it's a tempting purchase. Last of the underperformers is underwear maker HanesBrands. Thomas Weisel initiated coverage June 3 with an "Overweight" rating, citing growth opportunities and margin expansion as reasons for a $23 price target. While it probably won't get back to $29 (its price last June) anytime soon, it's a start. (For more on analyst expectations, be sure to read Analyst Forecasts Spell Disaster For Some Stocks.)

The Bottom Line
The power of the brand can be effective when picking stocks - even moreso than other tried and tested methods of portfolio selection. The beauty of it is, these brands are right under all of our noses.

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