Persistence of High Net Profit Margin Firms

Kailash created a very quick research piece based on a question regarding the historical persistence of firms with unusually high margins that can be found here.  As documented in that piece, over history, the ability of the market’s most profitable firms to maintain atypically high margins has been fleeting at best. The chart below highlights that Large Cap companies have never made up such a large percentage of these super-profitable firms as they do today.

Kailash believes this is particularly notable in light of:

  1. Recent government announcements calling for the breakup of Big Tech due to “Monopoly Power” concerns
  2. The rising tide of social and political anxiety as highlighted in Netflix’s smash documentary “The Social Dilemma” which focuses on the ability of incredibly profitable firms like Google and Facebook to entrench their monopoly positions due to unprecedented profiling of individuals and
  3. The government’s efforts to mitigate the impact of the unprecedented economic fallout from the Coronavirus has exacerbated income inequality as America’s billionaires saw their wealth increase by a staggering $637 billion dollars while 10s of millions faced job losses

 

 

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