The S&P 500 (SNPINDEX:^GSPC) includes 500 of the biggest stocks in the market. But as fortunes for individual companies rise and fall, the S&P 500 constantly has to shift gears to include new up-and-coming prospects while relegating fallen stars to more modest status.
To identify some of the stocks most likely to be the S&P's big winners of the future, I've taken a look at the largest companies in the S&P MidCap 400index. By focusing on growing mid-caps, you can get a head-start on what are likely to become the newest members of the S&P 500 in the near future. Let's look at the four companies in the S&P MidCap 400 that have market-caps above the $10 billion mark, which in many investors' eyes qualifies them for large-cap status already.
Vertex Pharmaceuticals (NASDAQ:VRTX)
Vertex has gained 60% over the past year, largely because of the early success of its cystic fibrosis treatments. With its Kalydeco drug already approved, trials that Vertex has run with other drugs in development have shown promising results from combining multiple drugs in a single treatment cocktail. With the stock trading at 12 times annual revenue and posting big losses, Vertex is still highly speculative, but bullish investors believe that Vertex can come through with new products to produce the sales and profits that it needs to thrive in the long run.
Green Mountain Coffee Roasters (UNKNOWN:GMCR.DL)
The maker of the Keurig single-serve coffee machine has defied skeptics for years, having survived allegations of accounting irregularities, loss of patent protection, and competing machines from traditional rivals to post a whopping 245% return over the past year. Green Mountain has done a particularly good job sustaining its share of the K-Cup market, holding on to 60% share of the single-serve market even as expiring patents allowed competitors to offer generic versions of their own compatible coffee pods. With smart partnerships with distribution partners, Green Mountain has the capacity to keep growing as long as people around the world keep drinking coffee.
Ametek isn't a household name, but the maker of electronic instruments and analytical devices has seen its stock fly upward by 58% over the past year. Exposure to the booming aerospace industry is one reason for the company's success, as its production of cockpit instruments and displays as well as electronics systems and monitoring sensors for commercial aircraft promises the company its share of what could be trillions of dollars in opportunities for aircraft makers to reap revenue in the next 20 years.
Affiliated Managers Group (NYSE:AMG)
Finally, Affiliated Managers Group has climbed 68% over the past year as the asset manager has benefited from the long bull market in stocks. By offering its advisory services to mutual funds and other professional investors as well as helping institutional investors establish customized asset-management frameworks to fulfill the fiduciary duties that foundations, endowments, and pension plans have to their respective constituencies, AMG enjoys the same recurring revenue stream that makes the investment management business so attractive to many investors. With money having poured into its funds recently, the growth story at AMG looks poised to continue well into the future as long as market conditions don't change too much.
Get a jump on the competition
One reason to look at these companies now is that when they get invited into the S&P 500, you can count on index funds to buy up their shares. But if you beat those funds to the punch, you might get a better entry price -- and more importantly could share in their growth for a longer period of time.