Who Are The S&P 500’s Newest Members?

Investors seemed more concerned about who wasn’t added to the major market benchmark index rather than the three newest S&P 500 additions.

Sept. 8, 2020

After a long Labor Day weekend, the markets are set to open back up this morning and we can get a good look at investors’ reaction to the S&P 500’s most recent shakeup.

So, which companies got the nod?

1. Catalent (NYSE: CTLT) is one of the world’s leading providers of delivery technologies, development, drug manufacturing, biologics, gene therapies, and consumer health products. It just reported a whopper of a Q2: Revenue jumped 31% to $947.6 million with projected annual growth of 12% to 19%. It also reported that it had been awarded more than 50 programs for COVID-19 vaccine and treatment candidates, including three Operation Warp Speed COVID-19 vaccine candidates. It replaces Kohls in the index.

2. Etsy (NASDAQ: ETSY) is an e-commerce company with a focus on handmade or vintage crafted items. E-commerce is booming right now amid the COVID-19 pandemic and Etsy has been in the thick of it. Revenue for Q2 rose 137% $428.74 million versus the consensus estimate of $329.95 million, with EPS of $0.75 far outweighing predictions. One outrageous stat from its blowout quarter is the fact that $436 million worth of face masks were sold through its platform. Though its share price is down 25% from all-time highs due to the recent tech sell-off, it is still up 148% year-to-date (YTD). It replaces tax software group, H&R Block, in the S&P 500. 

3. Teradyne (NASDAQ: TER) is a developer and supplier of automatic test equipment, with high-profile clients such as Samsung and IBM. Reporting on its Q2 earnings way back in July, the company saw revenue grow 49% year-on-year (YoY)to $839 million, with non-GAAP EPS growing 102% to $1.33. One of its most impressive stats in the past year is its return on capital employed (ROCE), which is a metric for evaluating how much pre-tax income a company earns on the capital invested in its business. Teradyne boasts a ROCE of 30%, compared to the market average of 9.7%. Teradyne replaces the beauty company, Coty, in the index.

What about Tesla?

A lot of investors were unhappy that the S&P 500 did not decide to go with Tesla after the automakers stunning 2020 run. Following its fourth consecutive quarter of posting a profit, the world’s most valuable automaker was finally eligible for major index inclusion, but the source of these recent profits may have proven to be its undoing. The company’s $483m of pre-tax profits in the first half of this year relied on $782m it made from selling regulatory credits to other carmakers, though CEO Elon Musk has reassured investors that this would not be a long-term strategy for the company. 

Another reason may be the rapid growth of the stock which is now valued at 235 times its forecast 2020 profits, compared to the average of 26 for other members. Tesla has not commented on its exclusion.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.