Monopoly Definition and 10 Near Monopoly Stocks in the US
In this article, we will take a look at the 10 near monopoly stocks in the US. If you want to see more stocks in this selection, go to the 5 Near Monopoly Stocks in the US.
A monopoly is defined as a market arrangement in which a single seller dominates the market and offers a unique product. In its purest form, a monopoly has a 100% share of the market. Numerous industries are dominated by prominent players with significant market shares. These firms enjoy economies of scale and create barriers to entry for any new potential player to come up and break their domination. Companies such as Alphabet Inc. (NASDAQ:GOOGL), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN) that have entered a sector and absorbed a sizeable amount of the market share are considered near-monopolies. These businesses frequently diversify their product lines in order to increase market share and revenue. Although the businesses allow some room for competition, they yield significant market power over the industry.
Monopolies enjoy strong pricing power, and famous investor and philanthropist Warren Buffett considers it a factor when he shortlists a stock for his portfolio that is followed and tracked by millions of investors globally. Back in 2011, when the Oracle of Omaha was asked to testify in front of the US Congress and provide the reason for investing in Moody’s Corporation (NYSE:MCO), he highlighted that pricing power is one of the most integral criteria for evaluating a business. He added that if a business can increase prices without losing its market share to an industry peer, it has a strong business model. Moody's, along with two other credit rating agencies, owns 95% of the credit rating market. The New York-based entity is still the eighth biggest investment in the portfolio of Omaha, Nebraska-diversified conglomerate Berkshire Hathaway Inc (NYSE:BRK-B), with a value of nearly $6 billion as of Q3 2022.
Interestingly, Apple Inc (NASDAQ:AAPL) is the biggest holding in the portfolio of Berkshire Hathaway, with a value of over $123.6 billion as of Q3 2022. The tech giant holds a monopoly or near monopoly position in numerous industries. Meanwhile, American Express Company (NYSE:AXP) is the fifth biggest investment in the portfolio of Warren Buffett. The New York-based company provides credit and debit cards along with Visa, Inc. (NYSE:V) and Mastercard Incorporated (NYSE:MA). Together, these three entities hold a 99% share in the credit and debit card industry. All these monopolies or near-monopolies generate healthy profits and receive a positive response from experts. Another example is Coca-Cola Company (NYSE:KO), which occupies the fourth biggest position in the portfolio of Berkshire Hathaway. Together with PepsiCo, Inc. (NASDAQ:PEP) and Keurig Dr. Pepper Inc. (NASDAQ:KDP), these three companies hold a market share of 57% in the soda industry.
Pixabay/Public Domain Our Methodology
We have shortlisted 10 near monopoly stocks in the US on the basis of their market share. Four of the companies in the list are a member of the FAANG list that comprises Meta Platforms, Inc. (NASDAQ:META) (previously known as Facebook), Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOGL) (previously known as Google). The Big Tech companies hold a dominant market share in numerous tech products and services markets like cloud computing, e-commerce, mobile application services, mobile operating systems, search engines, social networking, and web browsers. Meanwhile, the remaining stocks on the list hold a near monopoly position in alcoholic beverages, personal credit rating, and satellite radio sectors. The stocks have been ranked in terms of the number of hedge funds having a stake in them as of Q3 2022.
10 Near Monopoly Stocks in the US
10. Pearson plc (NYSE:PSO)
Number of Hedge Fund Holders: 3
Pearson plc (NYSE:PSO) is a London, United Kingdom-based education publishing and assessment service provider with a rich history of over 180 years. The company has the distinction of being the biggest publisher of educational materials and textbooks in the world.
Pearson plc (NYSE:PSO) generates around two-thirds of its top line and bottom line from the US market, as it has over 40% of the market share in the US in the fields of assessment, publishing, and online program management. The rest of the education publishing and assessment service market is very fragmented, with thousands of smaller players. In a research note issued on December 12, Daniel Kerven at JPMorgan increased the price target on Pearson plc (NYSE:PSO) from $13.02 to $14.74 and reiterated an Overweight rating on the stock. The revised target price reflects a potential upside of over 29% from the closing price on December 20. Pearson plc (NYSE:PSO) has made key acquisitions in the past to establish its monopoly position in the education sector.
13D Management was the leading hedge fund investor in Pearson plc (NYSE:PSO) during the third quarter of the year.
9. Sirius XM Holdings Inc. (NASDAQ:SIRI)
Number of Hedge Fund Holders: 24
Sirius XM Holdings Inc. (NASDAQ:SIRI) is a New York-based provider of online and satellite radio that broadcasts music, live sports, news, and original talks.
The company has a monopoly status in the satellite radio market. Sirius XM Holdings Inc. (NASDAQ:SIRI) also countered Pandora’s attempts to capture its market share by acquiring the company in July 2021 for $3.5 billion. Bryan Kraft at Deutsche Bank assigned Sirius XM Holdings Inc. (NASDAQ:SIRI) stock a target price of $7.50 along with a Buy rating on November 2 following the Q3 2022 results. Experts believe that the company reported decent Q3 results as installation and subscriber numbers were in line with expectations. On December 1, Bloomberg reported that Sirius XM Holdings Inc. (NASDAQ:SIRI) intends to lower its headcount to streamline its operation and costs. The company finished 2021 with a total headcount of 5,590 employees.
As of Q3 2022, Sirius XM Holdings Inc. (NASDAQ:SIRI) was held by 24 hedge funds.
8. Fair Isaac Corporation (NYSE:FICO)
Number of Hedge Fund Holders: 34
Fair Isaac Corporation (NYSE:FICO) is a San Jose, California-based data analytics software corporation founded in 1956.
The company is known for its benchmark three-digit consumer credit risk rating, known as the FICO score. The score has become a benchmark in the multi-trillion consumer lending and mortgage business in the US. Fair Isaac Corporation (NYSE:FICO) has faced numerous antitrust lawsuits related to its monopoly on consumer credit ratings. There have been claims that those not rated by FICO are at a disadvantage and not creditworthy enough when applying for a loan or mortgage. Manav Patnaik at Barclays increased the target price for Fair Isaac Corporation (NYSE:FICO) from $575 to $700 and reiterated an Overweight rating on December 2. The role of the consumer credit risk rating like the one offered by Fair Isaac Corporation (NYSE:FICO) receives greater importance during periods of economic downturn as banks and other financial institutions take a closer look at the creditworthiness of the borrower.
7. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 47
Altria Group, Inc. (NYSE:MO) is a Richmond, Virginia-based producer and marketer of tobacco, cigarettes, and other related offerings. The company is the parent company of Phillip Morris USA.
Through its wide portfolio of brands, Altria Group, Inc. (NYSE:MO) has the distinction of being the biggest player in the cigarette and tobacco manufacturing industry, with a market share of around 50.6% of total industry revenue. This gives Altria Group, Inc. (NYSE:MO) strong pricing power and the ability to generate strong top-line and bottom-line results. The stock also offers an attractive one-year forward dividend yield of 8.05% as of December 20. Christopher Growe at Stifel has assigned Altria Group, Inc. (NYSE:MO) stock a target price of $50 with a Buy rating in an update issued to investors on October 28. The analyst highlighted that the news regarding the development of the company’s joint venture with Japan Tobacco overshadowed the Q3 2022 EPS miss.
6. Anheuser-Busch InBev SA/NV (NYSE:BUD)
Number of Hedge Fund Holders: 58
Anheuser-Busch InBev SA/NV (NYSE:BUD) is a St. Louis, Missouri-based brewing company that owns leading global brands.
The owner of Budweiser, Bud Light, Stella Artios, and numerous other brands has the distinction of being the biggest brewing company in the world and has a 40% market share in the US beer industry. The company's market share is significantly higher than the other players in the industry. Jared Dinges at JPMorgan gave a double upgrade to Anheuser-Busch InBev SA/NV (NYSE:BUD) stock on November 28 from an Underweight to an Overweight rating and increased the target price from $45 to $70. The analyst anticipates Anheuser-Busch InBev SA/NV (NYSE:BUD) to outperform the consensus earnings forecast for the next quarter and has highlighted the company's effort to lower its debt.
Broyhill Asset Management shared its outlook on Anheuser-Busch InBev SA/NV (NYSE:BUD) in its Q4 2021 investor letter. Here’s what the firm said:
“Shares of ABI struggled to buck the double-digit decline in emerging market indices in the second half of the year. Consensus concerns around commodity cost headwinds certainly didn’t help matters, but beyond short term margin pressures, both businesses continue to grow their profits as well as their economic moats. ABI controls over a quarter of the nearly $600 billion global beer market, based on Euromonitor data, and remains well positioned for a rebound in post-pandemic industry sales.”
In addition to Anheuser-Busch InBev SA/NV (NYSE:BUD), popular companies like Alphabet Inc. (NASDAQ:GOOGL), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN) are in a leadership position across different sectors in the US.
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Disclosure. None. Monopoly Definition and 10 Near Monopoly Stocks in the US is originally published on Insider Monkey.
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