One Contrarian Reason to Like Advanced Micro Devices, Inc. (AMD) and SAIC, Inc. (SAI)

Can AMD and SAIC win in the end?
Investors in AMD and SAIC, Inc. (NYSE:SAI) shouldn’t give up hope, though. Research from Wharton market historian and research professor Jeremy Siegel took a look at the key question of how stocks that get added to, or deleted from, the S&P 500 perform after their index moves. The surprising result was that, on average, the stocks that got kicked out of the S&P did better than those that got added.

Intuitively, that result makes a degree of sense. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) and Ametek have already experienced big share-price gains, making it more challenging for them to produce outpaced returns in the future. By contrast, companies that get deleted from the index often have posted terrible performance, and subsequent turnarounds can reverse their fortunes quickly.

Keep your eyes open
Obviously, Siegel’s research findings don’t make Advanced Micro Devices, Inc. (NYSE:AMD) and SAIC, Inc. (NYSE:SAI) automatic buy candidates. But, after all the index-fund-related buying and selling is done, it’ll be interesting to see whether Vertex and Ametek live up to their promise — and whether AMD and SAIC will eventually find their way back into the S&P 500 at some point in the future.

The article 1 Contrarian Reason to Like AMD and SAIC originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Vertex Pharmaceuticals.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.