Jesse Livermore has a characteristically great and thorough look at U.S. profit margins up on his website, which I highly recommend.
I’ve written about margins a few times in the past and find them fascinating. Jesse’s key point is how important financial and technology stocks are to current U.S. profit margins, so I thought I’d add some fuel to the fire. Below are the top 24 stocks by contribution to overall margin in the U.S.
This means that Apple, for example, is responsible for 3.45% of the markets overall net profit margin (the math is (Apple’s margin (21.6%) * Apple’s share of the overall markets sales (1.27%) / the markets overall margin (7.98%)) = 3.45%). These 24 companies alone determine about 1/3 of the U.S. markets total profit margin. 12 of these 24 are financial or tech stocks–a notably disproportionate total given that these are just 2 of the 10 GICS sectors.
These 12 financial/tech stocks make up 19.5% of the markets margin.
The future of U.S. margins, then, rest squarely on their shoulders. Their average margin is 19.8%. That is damn high! Who knows if these are sustainable, but these are the companies that matter most. I’d love to hear what you think about their sustainability.