As industries around the world begin to open after months, let’s take a look at the 10 most profitable industries in the world in 2020 to glean an idea on which industries will recover the fastest. Covid-19 has disrupted the global economy like nothing before, in a completely unprecedented situation. As billions of people went into lockdown and all non essential businesses in most of the countries around the world were closed, we cannot even fathom the losses that have occurred in the past few months.
There is a bright light at the end of the tunnel though; many countries have now started lifting their lockdowns as both cases and deaths have decreased significantly from their peak. The US, unfortunately, is not one of them. Don’t get me wrong; all 50 states have engaged in lifting their lockdowns at least to some extent, while some have even resumed most businesses in states such as Texas and Florida, it’s just that the cases and deaths have not reduced to a number which would make this decision logical. In fact, there are now significant fears about a second wave as many states have started reporting their highest cases in weeks.
Because of the lockdown, thousands of businesses across the globe have gone bankrupt, and closed their doors permanently, resulting in tens of millions of people filing unemployment. Even now, as the industries start to open, the cost of implementing countermeasures to the novel coronavirus, and limitations on capacity means most business will struggle well after the lifting of restrictions.
If any industry will recover however, the most profitable industries in the world are likely to lead the charge. These industries engage in business which have great returns and high profits, and so, are likely to start recovering the losses during this period of uncertainty. In fact, some industries have even continued making profits during this pandemic. After all, there is a reason why the wealth of billionaires has increased by $308 billion from March to now, while as I mentioned earlier, the average person can barely make ends meet.
To find out the most profitable industries, we used statistics compiled here, which ranks the profits and other measures of global industries. These findings are based on data compiled from over 40,000 companies and bifurcating it by industry. We have used the two most important metrics for judging the profitability of an industry; it’s net income and the return on capital. Ultimately, a company which makes $50,000 on an investment of $1 million is more profitable than a profit of $50,000 on an investment of $10 million. You will also find most of the 10 most profitable companies in the world in 2020 belong to the industries mentioned below, starting with number 10:
10. Semiconductor industry
The industry is, as the name suggests, related to the manufacturing of semiconductors, a critical component necessary for powering many integral electronic devices, such as the computer you are reading this on. The industry boasts net profits of $67 billion and and a return on capital of 14.45%, and some of its biggest companies include Samsung and Intel. The top ETF tracking this industry is iShares PHLX Semiconductor ETF (NASDAQ:SOXX).
9. Insurance (Life)
There are millions of different types of insurances out there. On an unrelated note, I am sometimes excused of hyperbole. However, no other insurance is as profitable as life insurance, which made net profits of $105 billion, though it also has the lowest return on capital percentage on our list, at 7.75%. The iShares ETF tracking this industry is iShares Dow Jones US Insurance Index ETF (NYSEARCA: IAK).
8. Healthcare Support Services
You might be surprised to see healthcare on this list. I know I certainly was, especially now that healthcare for most countries is on display, and they are not carrying out a very good job. However, in countries like the United States, where healthcare is not a given right and is generally considered to be a for profit industry, the money to be made from providing essential services can be obscene, thus generating $38.5 billion in revenue and a healthy return of 9.33%. The industry is tracked by iShares U.S. Healthcare Providers ETF (NYSEARCA: IHF).
7. Computer services
Anything related to technology is a gold mine, which is why 5 out of the 10 most profitable industries in the world belong to the technological sector. Computer services include a wide range of services, from security to simply processing of data such as payroll. These services have enabled the industry to earn $48 billion in net profits and a return on capital employed of 15.06%. The industry is tracked by multiple iShares ETFs, including iShares U.S. Technology ETF (NYSEARCA: IYW).
6. Software (Entertainment)
The world of software is so huge, different types of software form their own industry, and this is not the only software category in the list. Entertainment software includes video games, which are a giant industry in their own right, earning a net profit of $65 billion and a return on capital employed of 16.59%. This industry is tracked by iShares Expanded Tech-Software Sector ETF (BATS: IGV).
5. Household products
You wouldn’t think something as mundane as household products would be one of the most profitable industries in the world but the truth can often be surprising. In fact, this industry is home to some of the biggest companies in the world, which produce household items which you will be aware of, and includes companies such as Proctor & Gamble, allowing it to earn net profits of $36.9 billion and return on capital of 13.64%. The industry is tracked primarily by iShares STOXX Europe 600 Personal & Household Goods UCITS ETF (FRA: EXH7).
The Oil and Gas industry is comprised of some of the biggest names in the world such as Shell, ExxonMobil, Chevron and British Petroleum. While these companies are taking hits in 2020 due to the drastic and historic fall in oil prices, it is still one of the most profitable industries out there earning it $251 billion in net profits and a return on capital employed of 8.64%, the second lowest in our list. This industry is tracked by iShares Oil & Gas Exploration & Production UCITS ETF (LON: SPOG).
3. Drugs (Pharmeceutical)
The drug industry is often in headlines for the wrong reasons, including the jacking of prices, made infamous by Martin Shkreli. While many countries around the globe regulate drug prices to ensure they are available to everyone, some countries like the US do not. Even in countries where drug prices are regulated, the margins are often quite high, making it an extremely profitable venture, leading to net profits of $104 billion and a return on investment of 10.37%. This industry is tracked by iShares U.S. Pharmaceuticals ETF (NYSEARCA: IHE).
2. Computers / Peripherals
In the last two decades, computers have gone from being a luxury to a complete necessity. And in the world where we have Covid-19 and work from home has increased exponentially, the computer industry shows no signs of stopping. In fact, you can expect to see a further increase in the profits earned by the industry, which currently stand at $97.8 billion and a return on capital employed of 16.34%. The industry is tracked by multiple iShares ETFs, including iShares U.S. Technology ETF (NYSEARCA: IYW).
1. Software (systems and application)
We told you there was another software industry in the list of 10 most profitable industries in the world in 2020, which is topped by the software (systems and application) industry. Perhaps the most popular company in this industry is Microsoft, which made Bill Gates the richest man in the world for several years, and has total profits of $73.5 billion, and an incredible return on capital of 23.63%, the best of any industry out there. This industry is tracked by iShares Expanded Tech-Software Sector ETF (BATS: IGV).