We recently published a list of 10 Most Profitable Large Cap Stocks to Buy Now. In this article, we are going to take a look at where Berkshire Hathaway Inc. (NYSE:BRK-B) stands against other most profitable large cap stocks to buy now.
The most profitable large-cap stocks, in terms of absolute net profit, are typically concentrated in industries with relatively high barriers to entry and substantial global demand. These include sectors like technology, healthcare, energy and consumer goods, where leaders can benefit from strong market positions, innovation and economies of scale. Furthermore, strong profitability usually translates very well into cash flow, which gives a lot of flexibility with capital allocation – the companies can either reinvest in growth during favorable times or support the stock price through repurchases when the market is less favorable. Consequently, the advantages of investing in such companies include stability, the potential for consistent revenue growth, and resilience during economic downturns.
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In the last decade, the most profitable large cap stocks have mostly clustered in the technology sector, leveraging such factors as the giant global total addressable market and wide margins allowed by the technological advantage. Furthermore, some of these companies took the center of the stage during 2023-2024, a time when the AI megatrend opened a new growth frontier and led to rising stock market concentration; in other words, the most profitable companies became even more profitable. This trend has resulted in a widening gap between the leading tech giants and other sectors, as investors increasingly flock to these high-growth stocks, anticipating continued dominance and innovation.
However, besides technology, there are some business models that also allow for strong profitability and cash flow. First, there are energy leaders who are literal cash cows and generate tens of billions of dollars annually from energy operations, which are vital to the world economy and are unlikely to be disrupted anytime soon. Second, there is the financial sector, and particularly banks, which are considered the blood of the world economy – by intermediating operations worth trillions of dollars annually, the leading banks can capture a tiny share of those transactions, which overall results in giant amounts of net profit. Last but not least, some of the most profitable companies in the world can be found even in more competitive sectors like consumer discretionary.
We believe that the most profitable companies can enter the spotlight again at a time when the US and global economy are at an important crossroads. Not only are these companies immune to tariffs and less sensitive to macroeconomic conditions, interest rates, and consumer health, but they also generate tens of billions of dollars in free cash flow every year, which gives them flexibility to adjust to a new regime. Investor sentiment has shifted to a pronounced bearish, as the US stock market officially entered correction mode, with more than a 10% contraction since the February peak. It appears that the fears of Trump tariffs staying for the long-term, as well as the negative impact on GDP growth from major cuts in public funding, are finally hitting the markets. Going forward, as smaller-cap stocks are pressured by uncertainty and deteriorating consumer confidence, profitable large caps can become safe havens and attract capital. The key takeaway for investors is that if one wants to stay invested in the US equity market amid the current turbulent times, they’re better off sticking to the widest moat and most profitable names out there.
Our Methodology
To compile our list of most profitable large cap stocks, we searched for the publicly traded companies with the largest amount of net income generated in the latest financial year and ranked them accordingly. For each company we also include the number of hedge funds that own the stock, according to Insider Monkey’s database of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A team of insurance professionals in a boardroom overlooking a city skyline.
Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 131
Last year net income: $88.99 billion
Berkshire Hathaway Inc. (NYSE:BRK-B) is a multinational conglomerate with a diverse portfolio of wholly owned subsidiaries and equity investments across industries such as insurance, energy, manufacturing, retail, and transportation. It owns companies like GEICO, BNSF Railway, and Berkshire Hathaway Energy, while holding significant stakes in publicly traded firms such as Apple, Coca-Cola, and Bank of America. The company generates revenue through its insurance underwriting, investment income, and the operations of its subsidiaries.
Berkshire Hathaway Inc. (NYSE:BRK-B)’s net earnings attributable to shareholders were $89 billion for 2024, including $41.6 billion in after-tax investment gains, which can cause earnings volatility. Insurance underwriting earnings were $9.0 billion in 2024, benefiting from improved results at GEICO, and included estimated claims from Hurricanes Helene and Milton ($1.2 billion after-tax) and a bankruptcy settlement accrual. BNSF’s after-tax earnings declined 1.1% due to a labor agreement charge and litigation charges, offset by higher volume, productivity, and lower costs. Berkshire Hathaway Energy’s earnings increased $1.4 billion, reflecting lower wildfire loss accruals and higher pipeline earnings. Manufacturing, service, and retailing earnings decreased 2.2%, with lower service and retailing earnings offsetting manufacturing increases.
No Class A or Class B shares were repurchased by Berkshire Hathaway Inc. (NYSE:BRK-B) in the fourth quarter of 2024. Cash, cash equivalents, and US Treasury Bills were $318.0 billion at year-end. Equity and fixed maturity securities, excluding Kraft Heinz and Occidental, were $287.0 billion. The company acquired the remaining Pilot ownership (20%) for $2.6 billion and BHE repurchased 5.85% of its outstanding common stock from noncontrolling shareholders for $2.9 billion. Consolidated borrowings were $124.8 billion. Operating cash flows were $30.6 billion, net of $28.5 billion in income tax payments, largely from equity security sales gains. All in all, BRK-B is one of the most profitable large cap stocks to buy now.
Overall, BKR-B ranks 2nd on our list of most profitable large cap stocks to buy now. While we acknowledge the potential of BKR-B as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BKR-B but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.