How do you most accurately measure the most profitable stocks? Some look to earnings over time, while others prefer margin-based metrics. Cash flow is king to others; some think growth metrics are the way to go. But if these stats and measures don’t convert to portfolio gains, do they really matter?
Instead, we’ll look at three of the most profitable stocks from a shareholder wealth perspective, which means more than just per-share pricing increases (though that’s a factor). These three stocks blend market value increases with cash outflows in the form of dividends and buybacks. Looking at the most profitable stocks from this perspective negates some of the massive per-share pricing spikes in small-cap and penny stocks, which may seem impressive on their face but ultimately deliver fewer gains to a well-rounded portfolio.
This unique focus ultimately makes the most profitable stocks profitable for those who matter: you and your portfolio.
Berkshire Hathaway (BRK-A, BRK-B)
Is it even possible to look at the world’s most profitable stocks from a wealth generation perspective without including Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B)? Warren Buffett’s mega-corp blends a wide-ranging portfolio encompassing over 50 companies across resilient industries such as real estate, transportation, energy and consumer goods. This breadth provides an easy route to a balanced investment portfolio without selecting multiple individual stocks.
Investing in Berkshire Hathaway means adopting Warren Buffett’s value-oriented investment philosophy. His conservative but pragmatic outlook, like slashing stakes in lower-performing firms such as Chevron (NYSE:CVX) to boost cash reserves, showcases a strategic rebalancing tactic that helps protect your portfolio during economic downturns. As market conditions shift, you can benefit from Buffett’s tactical use of cash reserves to seize opportunities when companies face challenges — a strategy that’s a major contributor to Berkshire’s status among the most profitable stocks.
Investing in Berkshire Hathaway allows you to leverage the expertise of one of the world’s most successful investors. For long-term investors, few of the most profitable stocks match the stability and growth potential of Buffett’s Berkshire Hathaway.
Visa (V)
Visa (NYSE:V) might not have the most glamorous business model, but that’s exactly why it stands out as a stable, long-term pick among the most profitable stocks. Its dependable revenue streams, solid operational model and adaptability to new trends have driven Visa stock to a remarkable 400% return over the past decade, doubling the performance of the S&P 500. Factor in dividends and buybacks — its current total yield is a modest but respectable 3.2% — and Visa’s 10-year growth ticks even higher to 433%.
Currently holding about 20% of the global cashless payment processing market, Visa isn’t resting on its laurels. The company is aggressively expanding its client base and embracing new technologies. One notable initiative is Visa’s push to introduce digital wallets to enterprise and corporate clients, which are already popular with consumers. This move aims to streamline corporate spending, tapping into the largest segment of global credit utilization — corporate credit. By enhancing its digital wallet offerings, Visa is well-positioned to capitalize on this growth area, further solidifying its long-term investment appeal and continued prospect as one of today’s most profitable stocks.
Home Depot (HD)
Home Depot (NYSE:HD) has faced challenges in recent years due to inflation and housing supply slowdowns, which stalled new construction. However, the macroeconomic environment is rapidly realigning, repositioning Home Depot among the most profitable stocks. Its 450% return over the past decade, accounting for both share appreciation and dividends, is impressive.
Home Depot enjoys a significant competitive advantage, facing little threat from new market entrants or existing rivals. While it remains a favorite among home improvement enthusiasts and DIYers, Home Depot is expanding its reach to professional renovation teams, contractors and builders. This strategy aligns with the growing housing supply and enhances Home Depot’s presence in the homebuilding market.
To meet anticipated demand throughout the 2020s, Home Depot plans to open 80 new stores over the next five years. This expansion reflects management’s confidence in increasing demand and positions the company to benefit from the expected rise in renovations and new construction as housing prices stabilize.
Home Depot also emphasizes dividend growth and distribution, having consistently raised its annual dividend for the past decade and doubling its quarterly payout since 2018. With a 57% payout ratio, Home Depot effectively balances shareholder value with maintaining sufficient cash reserves for further expansion, making It a clear choice for long-term wealth generation and cementing its status among the most profitable stocks.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.