The Highest-Margin Sector in America Isn't Tech

Chart of the Week #106

I rarely run two Chart of the Week essays in a single week — only when something genuinely compelling crosses my desk. This is one of those occasions.

With that in mind, dear reader, let me pose you a question.

Which sector has the highest profit margins right now?

If you guessed tech or financials, you’d be way off. Both sectors have dominated headlines and capital flows for years — tech especially, on the back of the AI trade. But neither is anywhere near the top of the chart below.

As you can see from the chart above, mining — specifically, the top 20 largest precious and base metals producers, stacked against the major S&P 500 sectors — is throwing off 31% margins. That’s nearly double Tech and Financials. More than four times what Consumer Staples or Communications are earning.

And here’s the part that should be impossible.

The market hasn’t noticed. Not in a way that matters anyway.

Despite earning fat margins like that, the mining sector as a group still trades at a fraction of the broader market’s cash flow multiple. How does that happen?

My conclusion is that most of the market is still analyzing mining through a framework that was written ten or fifteen years ago. Back then, mining was overcapitalized, undisciplined, and bleeding cash on chase-the-grade exploration and ego-driven M&A. Mainstream investors who tried to own miners through the 2012-2020 commodity malaise got burned — and learned to treat the sector as a place to avoid.

That picture is no longer true.

Mining companies today are disciplined operators. They’ve stopped chasing volume. They’ve cut capex. They’ve paid down debt. They’ve returned cash to shareholders. They’ve shifted from “growth at any cost” to “free cash flow per share.” And they’re doing all of this at a moment when gold is up roughly 70% in the past 18 months, silver has more than doubled over the same period, and copper is staring down a supply shortfall no new mine in the pipeline can fix in time.

But the market is still anchored to the old story. And that, of course, is the opportunity.

Have a great rest of the weekend,

Lau Vegys

P.S. Since Trump’s inauguration, gold is up about 70%. Silver is up about 150%. And that’s with what Trump kept calling an “uncooperative” Fed chair. Under new Fed chair Kevin Warsh — brought in specifically to be the cooperative one (see my recent essay on this) — I wouldn’t be surprised if those numbers double. Maybe triple. That’s exactly why a significant portion of our Crisis Investing portfolio is focused on precious metals plays — many of which Doug Casey himself owns.