How to Spot the Next S&P 500 Stocks Before They Join

This metric is key… [TradeSmith Daily]( How to Spot the Next S&P 500 Stocks Before They Join By Lucas Downey, Contributing Editor, TradeSmith Daily Did you get the memo? On March 1, something extraordinary happened for two marquee companies. Super Micro Computer (SMCI) and Deckers Outdoor (DECK) joined the most prestigious market group: the S&P 500 Index. And while SMCI gets all the attention lately (after a 20x return in less than two years, I can’t blame them), don’t forget that [TradeSmith Daily was all over this meteoric move back in January](. The less-loved Deckers should also be on your radar. If you recall, back in the heated bear market in October 2023, [I told you to zero in on Deckers because of its fantastic fundamental picture](. Today, we’re going to cover what I believe is the most important metric that these two companies share. And it’s related to one of the selection criteria for being added to the S&P 500. After all, if it’s good enough to be added to the S&P 500, chances are it’s good enough for you. RECOMMENDED LINK [The Convergence of A.I. and Crypto Is Going to Create Generational Wealth]( Legendary crypto investor Charlie Shrem, who bought Bitcoin back when it was just $5, believes A.I. is going to be the biggest winner of the 2024 crypto bull run. When you combine A.I. and crypto — the two biggest technologies of our generation... Early adopters could see 10X, 50X, or even 100X over the next 12 months. [Click here to discover the top 5 A.I. cryptos for 2024]( One Factor that Makes DECK an S&P 500 Stock Likely surprising to many, the [S&P 500 stock-selection criteria is quantitative](. That’s right — the passive benchmark is rooted in analytics! While the criteria for new companies added to the SPX isn’t fully known, we do know a few things based on the S&P Global link above. The committee selects companies by: - financial viability - public float - adequate liquidity - And company type Today we’ll dive into the first factor, financial viability. The S&P committee looks for four consecutive quarters that, when combined, form a year of profitability by GAAP (generally accepted accounting principles) standards. In other words, profits are critical! If you plan to have long-run success as an investor, focus on companies growing their profits. And that brings me to Deckers. Back in October, I listed out the diluted earnings per share (EPS) for Deckers since 2018. Back then the estimated EPS for 2024 stood at a solid $23.65. Wall Street was behind the ball on this juggernaut because the latest estimate pegs 2024 EPS at $27.03… and now 2025 is targeted at $30.24: This stairway to heaven, of continually growing earnings year after year, is what’s important. The best companies I’ve ever found grew earnings year after year: Microsoft, Google, and Visa, for example. (Disclosure: I own shares of all three of these companies.) Lots of companies can grow their revenues, but managing expenses is critical. Having a bottom line in the green tells you the business is “viable.” Now let’s do the same exercise for Super Micro Computer. Below you’ll see the annual diluted EPS since 2018. Feel free to print this sucker out and stick it on your refrigerator. This is a beauty! RECOMMENDED LINK [Elon Musk’s “A.I. Day” Announcement Will Open a Brief Wealth Window]( Elon Musk has cracked open a radical wealth building opportunity set to create a slew of new millionaires... This narrow window will close when Elon holds his upcoming “A.I. Day.” We’re now on the final stretch before Elon’s new project becomes mainstream to the public. A Silicon Valley insider has revealed everything you need to know about this wealth window before it shuts. [Click here now to discover how to profit before the huge public announcement](. On a five-year basis, EPS has zoomed at a 66.8% compound annual growth rate (CAGR). In 2024 the estimated diluted EPS stands at $21.78, nearly double 2023’s $11.43: I say, forget stock charts. Focus on growing profits instead. If you simply focus your attention to the growth of the bottom line, you’ll save yourself a lot of headaches. Ultimately you’ll find that your universe of potential investments shrinks to just contenders, rather than pretenders. The S&P 500, one of the greatest indices on Earth, is focused on the profit growth of each of its constituent businesses. Shouldn’t you? This is why using a quantitative process can help lead you to success. TradeSmith uses this exact process to guide thousands of investors toward quality companies based on their technical and fundamental attributes. By focusing on the few firms growing profits like clockwork, chances are the next crop added to the S&P will be on your radar ahead of the announcement. Regards, Lucas Downey Contributing Editor, TradeSmith Daily P.S. Quantitative investment analysis is what we do best at TradeSmith. We don’t follow manias or shout on the corner about the end times. We let data do the talking… and then we listen. For a great taste of how this works, [check out TradeSmith Investment Report]( written by my good friend and business partner Jason Bodner. Jason uses quantitative fundamental analysis to pick great stocks for your portfolio. It’s simple, but extremely effective. Recently, every single one of Jason’s recommended positions was in the green. And his most recent recommendation, on a high-tech medical device company, is still a buy. [Go here to learn more about Jason’s work in TradeSmith Investment Report, and start using a quant strategy in your portfolio for just $49.]( Get Instant Access Click to read these free reports and automatically sign up for research throughout the week. [25 Doomed Blue Chip Stocks]( [3 Stocks to Build Your Wealth in 2024]( [5 Unapologetically Profitable Stocks for 2024]( [Download now on the Apple Store]( [Get It On Google Play]( [Customer Support: 866.385.2076](tel:+866-385-2076) | support@tradesmith.com [Request Customer Service](mailto:support@tradesmith.com) ©TradeSmith, LLC. All Rights Reserved. You may not reproduce, modify, copy, sell, publish, distribute, display or otherwise use any portion of the content without the prior written consent of TradeSmith. TradeSmith is not registered as an investment adviser and operates under the publishers’ exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith’s content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. There are risks inherent in investing and past investment performance is not indicative of future results. TradeSmith P.O. Box 340087 Tampa, FL 33694 [Terms of Use]( [Privacy Policy]( To unsubscribe or change your email preferences, please [click here](. [tradesmith logo]