Find untapped investment opportunities beyond the S&P 500 Index

Dell Technologies Inc NYSE: DELLThe Trade Desk Inc. NASDAQ:TTD and Apollo Global Management Inc. NYSE:APO They represent a diverse group of companies but they have something in common: They are large-cap stocks that aren’t part of the S&P 500 but are outperforming the index.

Contrary to popular belief, S&P 500 stocks are not necessarily the largest national companies.

According to S&P Dow Jones Indices, which oversees the index, “The selection process for the S&P 500 is governed by quantitative criteria – including financial sustainability, public float, adequate liquidity and company type – that determine whether a stock is eligible for the index. inclusion. “

To join the index, a company must have a large enough market capitalization to be considered a large-cap stock. “It must also have sufficient float, or a percentage of shares available for public trading,” says S&P Dow Jones Indices.

Stocks like Dell, The Trade Desk, and Apollo can outperform the overall index for several reasons, including:

• Exclusion from the S&P 500 does not necessarily reflect inferior fundamentals or growth potential.
• Being out of the index could mean they are undervalued or undervalued by investors, presenting buying opportunities.
• Smaller large-cap stocks may have more room for growth than larger, more established components of the S&P 500 Index.
• Active fund managers seeking a higher return than they get from the S&P 500 can look beyond the index to outperform stocks, contributing to potential price appreciation for these large-cap outliers.

Dell beats S&P by wide margin

The Dell Technologies chart clearly shows the stock’s huge margin of outperformance versus the S&P 500 and versus other tech stocks in the Technology Select Sector SPDR Fund NYSEARCA: XLK.

Dell shares have returned 31.09% over the past month, while the S&P 500 has returned 3.15%.

Dell has a market capitalization of $78.28 billion, easily qualifying it for membership in the S&P 500 Index.

The company has essentially printed money, with a long track record of profitability. Full-year operating profit for 2023 was $5.8 billion. Wall Street expects earnings of $7.56 per share this year, an increase of 6%.

In 2025, it is expected to rise 13% to $8.57 per share.

The Trade Desk Trading in Volatile Fashion

Online advertising manager The Trade Desk boasts a market capitalization of $39.19 billion and a one-month yield of 8.82%.

The company has grown earnings at double- and triple-digit rates for the past seven quarters, and analysts expect the same in 2024 and 2025.

The Trade Desk chart shows that this is a highly volatile stock, despite its potential for market-beating returns. It has a beta of 1.81, meaning it is 81% more volatile than the broader market.

“We expect this demand-side platform provider, which helps ad buyers manage programmatic ad campaigns, to benefit from continued growth in digital ad spending,” Morningstar analyst Michael Hodel wrote in a March 12 research note .

Hodel considers the stock overvalued, with a fair value estimate of $52; the stock closed at $80.16 on March 13. Trade Desk analyst forecasts show a consensus view of “moderate buy” with a price target of $88.93, an upside of 10.93%.

Apollo Stock flies high

Apollo Global Management, with a market capitalization of $62.42 billion, is not yet part of the S&P 500 Index.

Apollo shares have outperformed the large-cap index, returning 19.67% over the past three months. The Apollo Global Management chart shows the stock correcting neatly above its 50-day moving average. Apollo shares are currently in the buy range, trading between that average and the previous high of $115.03.

Apollo has an arcane business model: it raises capital, invests and manages alternative investment vehicles, including private equity and credit transactions. Wall Street expects Apollo to earn $7.79 per share this year, up 16%.

CFRA analyst Kenneth Leon, in a March 9 note, said: “We believe APO has the right business mix in private credit/fixed income, insurance and private equity, with less exposure to real estate.” . He added that most of the company’s assets can do well in any interest rate market. Leon said he sees an opportunity for the company in the insurance and private credit markets.

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