What are high-margin securities?
'High-margin securities' is an expression that refers to shares in companies that enjoy unusually high profit margins. Frequently, although not always, such companies operate in unglamorous fields such as mining, quarrying and waste management, meaning they can be overlooked by some investors.
Where have you heard about high-margin securities?
As an investor you may have been advised to buy one or more high-margin securities. Or you may have read articles listing 'high-margin industrial stocks with big potential'.
What you need to know about high-margin securities.
High-margin securities can be found in every business sector, whether shares in chic fashion houses, in a booming computer company or in smart hotels and restaurants. The trick for the smart investor is to unearth those high-margin securities that have been overlooked, maybe because they are in unfashionable sectors such as heavy industry, haulage and removals, utilities or precision components. Key to high profit margins is good cash flow and an absence of competition, either because nobody else want to get into the business or, more likely, because there are high barriers to entry, such as cost or regulation.
Find out more about high-margin securities.
To learn more about high-margin securities and how they could fit into your share selection, see our definition of portfolio.