If you want to know where you can start looking for great stocks to buy and hold for the long term, a recent study by FORBES may provide some answers.
The study ranked 19 major U.S. industries by their forecast net profit margins to determine the industries that could be hiding the best investments.
Obviously, more than a simple forecasted profit margin goes into a successful investment, but I'll agree it can be an excellent starting point.
Here're the top five industries most profitable industries according to Forbes, and five Australian companies to go with it.
- Health Technology – Profit Margin: 21%
It's little wonder the companies that millions of people trust every day to keep them alive can demand healthy profits. ResMed Inc. (CHESS) (ASX: RMD), the $10 billion global biotechnology company specialising in devices for the treatment of sleep apnoea, achieved a net profit margin of exactly 21% in its 2015 financial year.
- Finance – Profit Margin: 17.3%
Who'd work in finance, honestly? The answer: People who want to make money! In its most recent half-year reporting period, Westpac Banking Corp (ASX: WBC) achieved a net profit margin of 18%.
- Technology Services – Profit Margin: 16.1%
We all know technology is extremely profitable, but coming in at number three it's probably a little lower than what many would've guessed. However, the positive effect of an industry tailwind and competitive advantage has enabled companies like Integrated Research Limited (ASX: IRI) to boast profit margins as high as 20.2%.
- Electronic Technology – Profit Margin: 13.2%
Companies like Apple, Google and Microsoft dominate this industry. However, broadband and machine-to-machine communications device developer Netcomm Wireless Ltd (ASX: NTC) is an example of an Australian electronic technology business. Unfortunately, its profit margin was just 3% last financial year – although that may very well grow over time.
- Consumer non-durables – Profit Margin: 11.8%
Consumer non-durables are businesses that sell products that we're likely to use every day. Coca-Cola Amatil Ltd (ASX: CCL) makes SPC branded tinned food, bottles Coca-Cola and distributes Jim Beam. While in recent years it's been struggling to adapt to a health conscious consumer, it generated a profit margin of 7.4% in its most recent half-year. That compares to the 12.1% it achieved over the full 2011 financial year.
