Dimitry Nakhla | Babylon Capital®
15 Quality Stocks With >40% Incremental Operating Margins (LTM) 💸

In other words: every $1.00 in 𝐍𝐞𝐰 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 in LTM turned into >$0.40 in 𝐎𝐩𝐞𝐫𝐚𝐭𝐢𝐧𝐠 𝐏𝐫𝐨𝐟𝐢𝐭

1. $GE 43%
2. $NFLX 47%
3. $LRCX 49%
4. $NVDA 53%
5. $ASML 53%
6. $MCO 55%
7. $MSFT 58%
8. $META 59%
9. $TSM 65%
10. $MA 66%
11. $MU 69%
12. $HWM 69%
13. $FICO 70%
14. $TDG 71%
15. $SPGI 76%

Chris Hohn, founder of TCI, views high incremental margins as one of the strongest signals of a company’s moat & pricing power💸

Incremental operating margin tells you how much additional operating income a business generates for every additional $1 of revenue.

Here’s how to calculate it:

Pick two periods (Year 1 → Year 2)

Year 1 Revenue: $10B
Year 2 Revenue: $12B
Δ 𝐂𝐡𝐚𝐧𝐠𝐞: $𝟐𝐁

Year 1 Operating Income: $2B
Year 2 Operating Income: $3B
Δ 𝐂𝐡𝐚𝐧𝐠𝐞: $𝟏𝐁

𝐈𝐧𝐜𝐫𝐞𝐦𝐞𝐧𝐭𝐚𝐥 𝐎𝐩𝐞𝐫𝐚𝐭𝐢𝐧𝐠 𝐌𝐚𝐫𝐠𝐢𝐧 = Δ 𝐎𝐩𝐞𝐫𝐚𝐭𝐢𝐧𝐠 𝐈𝐧𝐜𝐨𝐦𝐞 / Δ 𝐑𝐞𝐯𝐞𝐧𝐮𝐞

So: $1B / $2B = 50%

𝘔𝘦𝘢𝘯𝘪𝘯𝘨: 50 cents of every new $1 of revenue fell to operating profit.
___

Why this matters: High incremental margins usually signal low incremental costs, pricing power, & structural operating leverage — the traits that allow a great business to compound faster as it scales. It’s one of the cleanest ways to see whether a company’s moat is strengthening & efficiently scaling.

I’ve included 4 high-quality stocks with their incremental operating margins since 2021 for further example 👇🏽

$FICO $MSFT $MA $NFLX - Dimitry Nakhla | Babylon Capital®
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God of Prompt
RT @godofprompt: R.I.P basic RAG ☠️

Graph-enhanced retrieval is the new king.

OpenAI, Anthropic, and Microsoft engineers don't build RAG systems like everyone else.

They build knowledge graphs first.

Here are 7 ways to use graph RAG instead of vector search: https://t.co/2T9q3IaRPB
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God of Prompt
RT @alex_prompter: secret life hack:

> install prompt copilot in your chrome browser
> create your context profile
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your prompts suck and your AI forgets you exist

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same you, any AI.

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Fiscal.ai
Uber has increased its take-rate over the years.

Current Mobility Take Rate: 31%

How much higher can this go?

$UBER https://t.co/eLGTAAqIVp
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God of Prompt
50% = the model you use
50% = your prompt

interesting research.

MIT tested 1,900 people on AI performance.

50% was the model.
50% was the prompt.

Your skill matters as much as the model itself. https://t.co/b43Q9l16bM - Prompt Copilot
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