To The Moon

Profit margins are becoming increasingly important to investors amid a backdrop of hyperinflation that continues to erode public company profits. Even Musk's electric car company $Tesla Motors(TSLA)$ also witnessed sharp decline in profit margins. Fortunately, there's still no shortage of moneymakers in the S&P 500. According to the data analysis results from S&P Global Market Intelligence and MarketSmith, 13 S&P 500 components reached over 30% of the adjusted net profit margin. Such a high level of profitability is rare in the market. By comparison, FactSet data show that the average profit margin for publicly traded companies is only 11.6%. In this list, Warren Buffett's $Berkshire Hathaway(BRK.A)$ $Berkshire Hathaway(BRK.B)$ are at the bottom with an adjusted net profit margin of 30.3%, while is still much higher than the Tesla's 5.4%. Wedbush analyst Dan Ives told clients that Tesla's third-quarter results could be summarized as a "mini-disaster". Company Ticker Adjusted Rate of Return After the Most Recent Quarterly Report $Vici Properties(VICI)$ $Vici Properties(VICI)$ 47.7 $CME Group Inc(CME)$ $CME Group Inc(CME)$ 46.7 $Visa(V)$ $Visa(V)$ 42.4 $VeriSign(VRSN)$ $VeriSign(VRSN)$ 40.7 $Altria(MO)$ $Altria(MO)$ 39.8 $Marriott(MAR)$ $Marriott(MAR)$ 38.7 $MasterCard(MA)$ $MasterCard(MA)$ 35.9 $NVIDIA Corp(NVDA)$ $NVIDIA Corp(NVDA)$ 32.3 $Public Storage(PSA)$ $Public Storage(PSA)$ 31.8 $Vertex Pharmaceuticals(VRTX)$ $Vertex Pharmaceuticals(VRTX)$ 31.6 $MSCI Inc(MSCI)$ $MSCI Inc(MSCI)$ 30.9 $Hilton(HLT)$ $Hilton(HLT)$ 30.4 $Berkshire Hathaway(BRK.B)$ $Berkshire Hathaway(BRK.A)$ $Berkshire Hathaway(BRK.B)$ 30.3 Profit Margins Become an Important Selection Criterion for Stock The high profit margins of these S&P 500 companies represent their ability to maintain pricing power, which is key during periods of inflation; and the market has responded positively. The prices of these 13 stocks have risen an average of 22.4% this year, well ahead of the S&P 500's 10%. In addition, since the stock market peaked this year, the $S&P 500(.SPX)$ is down nearly 8%, while these stocks are down only 4.5% over the same period. In addition, it's becoming harder for publicly traded companies to maintain their profit margins. FactSet's John Butters says the profits margins of S&P 500 declined from 11.9% a year ago to 11.6%, which is the seventh consecutive quarter of year-over-year declines. Tesla's sliding margins As for the topic, Tesla is a prime example. In the midst of its just-released third-quarter report, Tesla's profit margins fell to just 5.4%, well below the 10.4% seen in the same period a year ago and the 7.7% in the June quarter, leading to the sharp decline of the stock price. The level of adjusted margins was only marginally higher than $General Motors(GM)$ 4.4% and $Ford(F)$ 3.3%. Other High-Margin Companies in the S&P 500 So what kind of S&P 500 companies have the highest profit margins? First we thought of the Artificial Intelligence (AI) concept, which has been a big hit this year. Thanks to the huge demand for AI products as well as AI stocks, it's no surprise that $NVIDIA Corp(NVDA)$ posted an adjusted net profit margin of 32% for the most recent quarter with its chips. What’s more, Credit card giants $Visa(V)$ and $MasterCard(MA)$ also posted net margins of 42% and 36%, respectively, thanks to continued volume growth. What we're not so sure is whether these companies will be able to maintain this level of profitability if inflation continues to spike? Follow me to learn more about analysis!!