Meet 2 of the Newest Additions to the S&P 500 Index. Their Stocks Have Rocketed 868% and 460% Since Their IPOs, Although Things Could Change in 2025, According to Wall Street.
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The broader benchmark S&P 500 will soon undergo its quarterly rebalancing on Dec. 23. This involves dropping certain stocks from the index and adding others to replace them. Changes help keep any particular index more reflective of its underlying market cap. The S&P 500 comprises large-cap companies with market caps over $10 billion that fulfill a certain set of criteria. Joining an index can be a catalyst because funds and investors that track the index essentially have to buy the stock, leading to inflows.
Let's meet two of the newest additions to the S&P 500, which have surged since their initial public offerings over a decade ago, and also see what Wall Street thinks of each stock heading into 2025.
Apollo Global Management: Up 868% since March 2011 IPO
Apollo Global Management (NYSE: APO) is one of the largest private equity (PE) companies in the world with more than $650 billion in assets under management (AUM) at the end of 2023. The company's flagship PE fund seeks to invest in a range of opportunities across sectors and geographies that generate attractive risk-adjusted returns. Since its inception, Apollo's PE fund has generated 24% net internal rates of return.
The company's largest business, however, is generating returns through credit underwriting and origination, also known as yield. Apollo allocates over $480 billion of AUM to this strategy, which you may have heard referenced as private credit. Yield businesses include corporate fixed income and credit, structured credit, real estate debt, and direct originations. In the third quarter, total AUM associated with private credit reached nearly $598 billion, up over $100 billion year over year.
Private credit has become a larger business for PE shops like Apollo as mainstream banks have faced intense regulation calling for higher capital and liquidity ratios. This, according to many bankers like JPMorgan Chase CEO Jamie Dimon, has shifted some of the traditional bank lending to companies like Apollo. Regulation has also made it less profitable for banks to do traditional loans like mortgages. Over the next five years, Apollo's goal is to roughly double its private credit business to $1.2 trillion AUM.
The stock has performed well, especially as banks have faced tougher regulatory capital requirements under President Joe Biden's administration. However, President-elect Donald Trump's administration is expected to go much easier on the banks, so this may change. Since going public in March 2011, Apollo's stock is up nearly 888%. The stock has also surged 91% this year, which is incredible for a large-cap, non-artificial intelligence financial stock.