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10 Most Profitable Businesses in Boston

By Anders Bylund - May 6, 2015 at 4:45PM

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In Boston, Harvard's old money rubs shoulders with MIT's startup crowd. How can you choose investment ideas among this embarrassment of riches? Start with big profits.

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Boston is known as the Athens of America. It's a thriving center of cultural, financial, and educational activity, the heart of New England, and dripping with history on the corner of every street. Something of an economic paradox, the city manages to be synonymous with "Old Money" while also hosting a booming start-up culture. And why shouldn't those values go together in a town that's home to talent recruiting Meccas such as Harvard and MIT?

Beantown is indeed a great place to find investment-ready stocks and businesses. But with literally hundreds of stocks headquartered in the greater Boston area, where do you begin?

I'd suggest starting at the top. Let's dive into the 10 most profitable public companies found between Milton and Malden today:

Company

Net Income (TTM, in millions of dollars)

Net Profit Margin (TTM)

CAPS Score (out of 5)

CVS Health (CVS 0.35%)

$4,630

3.3%

4

Biogen Idec (BIIB 0.78%)

$3,280

32.4%

4

EMC (EMC)

$2,570

16.4%

4

TJX Companies (TJX 0.97%)

$2,220

7.6%

4

Raytheon (RTN)

$2,100

9.7%

4

Data from Yahoo! Finance and Finviz.com, current as of 5/6/2015.

It's a diverse group.

CVS and Biogen may both count as plays on the healthcare industry, but they attack that market with very different strategies.

Biogen develops advanced medical treatments, sold to patients at very high profit margins. CVS runs the pharmacies that dispense drugs made by Biogen and others, including a massive chain of pharmacy-equipped convenience stores. The margins in this sector are razor-thin, but CVS makes up for it in huge sales volumes.

If Biogen is a cousin to CVS on the medical side, then TJX represents the retailing side of the same family. Under brand names such as T.J. Maxx, Marshalls, and HomeGoods, the company runs discount apparel and home goods stores in five nations. Like most retailers, TJX reports large volumes but low margins -- and it adds up to billion-dollar profits on the bottom line.

EMC works in another high-margin market, selling storage systems to enterprise-class customers worldwide. Defense contractor Raytheon runs another highly profitable business model, shifting fewer but larger units than EMC.

Wait -- that's only five! Didn't you promise me 10 names?
Yes, I did. I just wanted to break them up a bit to show an alternative approach.

The next five stocks on my Boston-flavored list don't sport the largest dollar profits in town. Instead, they all brandish the area's largest profit margins:

 Company

Net Profit Margin (TTM)

Net Income (TTM, in millions of dollars)

CAPS Score (out of 5)

State Street (STT 2.98%)

75.6%

$1,990

3

Enanta Pharmaceuticals (ENTA -1.88%)

65.9%

$82

3

Select Income REIT (NYSE: SIR)

47.6%

$106

5

Boston Private Financial Hldg (BPFH)

39.3%

$60

5

Aspen Technology (AZPN)

32.4%

$107

2

Data from Yahoo Finance and Finviz.com, current as of 5/6/2015.

There's a tighter focus in this group. State Street, and Boston Private operate various banking and financing services. They focus mainly on financial advice and wealth management, just with slightly different demographics in mind. Both would feel right at home in New York's financial district, if they weren't already so comfortable in Boston's version of the same district. State Street is the older and better-known of these money managers, and enjoys stronger economies of scale.

SIR is another financial specialist, managing about 50 real estate properties in 11 states. Two-thirds of the portfolio's square footage is found on the island of Oahu, Hawaii. In other words, SIR is a highly efficient manager of high-value real estate properties.

That's the end of the financial cohort. Enanta takes us back to the medical field, mainly developing treatments for hepatitis C patients. The company has drug development partnerships with two larger companies, alongside deep collaboration with the National Institute of Allergy and Infectious Diseases. Not bad for a relative minnow with a $660 million market cap and just $124 million in trailing sales!

Finally, Aspen Technology sells specialized software and services to manufacturing businesses. The company's largest customers include oil producers and heavy industrial conglomerates, with a healthy side of pharmaceutical manufacturing. In other words, Enanta and Biogen may depend on Aspen's products to optimize their own manufacturing and supply chain processes, hooking right in to CVS at the end of the line. One big, happy family.

Final words
There's a lot to chew on in these two short lists, and you'll find ideas for nearly any investment philosophy. If you'd prefer a balance between large profits and wide margins, you should know that State Street fell just short of the dollar-volume list, and would have been the sixth-ranked name on that list. Likewise, Biogen Idec's net margins are just a rounding error below Aspen Technology's. Those two stocks would be a great place to start exploring Boston's financial and health care prospects, respectively.

That being said, I'm not making any Foolish recommendations here. These lists should be taken as jumping-off points for further research, albeit under the umbrella of Boston's most profitable operations. If you're an absolute beginner, you can put on your red socks and get started with 13 steps to investing Foolishly right here.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends CVS Health and Yahoo. The Motley Fool owns shares of Yahoo. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

CVS Health Corporation Stock Quote
CVS Health Corporation
CVS
$104.05 (0.35%) $0.36
Dell EMC Stock Quote
Dell EMC
EMC
Biogen Inc. Stock Quote
Biogen Inc.
BIIB
$219.29 (0.78%) $1.70
Raytheon Company Stock Quote
Raytheon Company
RTN
The TJX Companies, Inc. Stock Quote
The TJX Companies, Inc.
TJX
$63.01 (0.97%) $0.60
State Street Corporation Stock Quote
State Street Corporation
STT
$72.48 (2.98%) $2.10
Aspen Technology, Inc. Stock Quote
Aspen Technology, Inc.
AZPN
Enanta Pharmaceuticals, Inc. Stock Quote
Enanta Pharmaceuticals, Inc.
ENTA
$66.99 (-1.88%) $-1.28
Boston Private Financial Holdings, Inc. Stock Quote
Boston Private Financial Holdings, Inc.
BPFH

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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