(FORTUNE Magazine) – LIKE POSITIONS on a professional baseball team, listings on the FORTUNE 500 are hard to win and tough to hang on to. Aggressive new talent is always pushing up from the farm clubs, itching for the chance to fill the shoes of any top player who falters. A year ago FORTUNE published for the first time a list of 25 of the brightest talents in the 500 farm league, medium-size but fast-growing companies struggling to break into the big time. Nine of those outfits have won places on this year's 500 list, led by Newell Co., which leapfrogged all the way to No. 386. Welcome, now, the star contenders for the rookie class of '89. They are an incredibly diverse group of enterprises, ranging in age from ten years to 182. Their products include such high-tech gems as filters to screen white cells from the blood, such stunningly unglamorous items as tire retreads, and such homey stuff as bathtubs and chickens. Each contender has devised its own successful formula for growth. A few are products of corporate restructuring -- lackluster divisions spun off by conglomerate parents, only to blossom in their newfound freedom. Some are conglomerate parents in the making, busily acquiring. Most are simply sticking to what they do best, and doing it better than competitors. Every company in the group has recorded average annual sales gains of at least 7% for the past three years, about triple the typical 500 corporation's growth over that span. Three-quarters of the 25 have been growing at double-digit rates. Hodgepodge as they may appear, most of these outfits share a striking characteristic: Management and members of the board of directors own significant chunks of the stock, giving them a strong voice in running the show and a stake in the outcome. At Pall Corp. of Glen Cove, New York, insiders own 10% of the shares. David Pall, 74, who is chairman, founded the outfit in 1946 to market a lightweight filter for aviation fuel that he invented. Now the company produces hundreds of high-tech filters for the chemical, aerospace, and health industries. Research and development are king at Pall, which spends about 4% of sales on research and an additional 3% on laboratories that work on customers' problems. ''We don't really budget for R&D,'' says Eric Krasnoff, a vice president who runs the biomedical division. ''We just spend whatever we have to.'' The trick, Krasnoff hastens to add, is to focus on unique products: ''We don't research things other people have already invented.'' Pall Corp. filters out a nice profit. Returns on shareholders' equity have averaged about 26% over the past decade. David Pall is no longer active in management, but he spends time at the lab and holds over 100 filtration patents. While Pall Corp. exploits unique advantages in a special niche, Valspar Corp. blazes a colorful trail in the staid old commodity business of paint. The Minneapolis company was founded in 1806. Sales grew to only $25 million by 1970, just before Valspar merged with another company of the same size: Minnesota Paint. After the merger Angus Wurtele, 53, became chief executive and began buying up other small paint companies at the rate of about one a year. Wurtele owns 12% of the shares; other insiders own 18%. Wurtele's strategy is to stick to paint. He removes any businesses in the acquired companies that don't fit the product line and streamlines what remains. He has organized more than 100 profit centers and has spurred on their managers with a trio of incentives: decision-making autonomy, performance bonuses, and stock ownership. ''Just one incentive won't do,'' he asserts. Valspar is now the fifth-largest company in the industry. Last year sales and earnings grew 18% and 22%, respectively, compared with industry averages of 7% and 2%. Molex Inc. and J.P. Industries Inc. have also expanded boldly in businesses where competition is strong and no player has a particular advantage. A family-controlled company, Molex disproves that old canard that family managers doze at the switch. Molex makes electrical connectors and switches used in such products as television sets, computers, and automobiles. The Krehbiel family of Lisle, Illinois, owns 49% of the shares, and John Krehbiel Sr., 81, runs the company with his two sons, John Jr. and Frederick. When Japan became a giant in electronics and auto production in the early Seventies, the Krehbiels quickly opened a Japanese plant and are now well established throughout the Pacific Rim. Roughly 70% of sales are now overseas. Krehbiel Sr. says success comes from doing a lot of little things well: ''We're not the best engineers, we're not financial wizards, and we're not leading innovators. We are generalists who do all that.'' He adds that owning a controlling block of the stock helps because his family doesn't demand big dividend payments. Thus, the company can plow a lot of its cash flow into further growth. ''And we are hell-bent on growth,'' Krehbiel Sr. says. ''Last year our sales were $386 million. But 1988 is our 50th anniversary, and we're determined to break $500 million if they have to carry my desk out and sell it.'' So much for drowsy family managers. J.P. Industries of Ann Arbor, Michigan, with sales rocketing at an 80%-a- year rate over the past three years, is the fastest-growing contender in the FORTUNE farm league. Yet again this is no high-tech company with a hot new product that incites customers to a feeding frenzy. J.P. makes plumbing fixtures such as sinks, tubs, and toilets, and tough metal parts for cars, such as camshafts and engine bearings. Not much sex appeal there. The company was founded in 1979 by John Psarouthakis, 55, a chess buff who believes in plotting ten moves ahead. Psarouthakis is assembling J.P. Industries from acquisitions, 14 so far, that he plans out in exquisite detail. First, he looks for targets that are profitable but underperforming. Then he develops what his vice president of planning, Miran Sarkissian, calls an ''action Bible,'' spelling out how to streamline the operation and who will carry out the plan. He sets a goal of at least 20% growth per year for his acquisitions. Psarouthakis too wears the cap of owner-manager. He owns 6% of the stock, and other insiders hold 7%. Perhaps that explains his patient but relentless approach. He exhorts employees to do at least one thing better each day, figuring that all improvements, however small, will add up. The company's motto: ''Better Makes Us Best.'' If the products of J.P. Industries seem mundane, take a look at Bandag Inc., one of several up-and-coming companies that have succeeded through marketing coups. The world's largest maker of rubber treads for recapping worn-out truck and bus tires, Bandag is in a business that makes most others look as glamorous as champagne. And yet there's good money in bad tires. BANDAG IS TO RETREADING what Big Blue is to computers: It sells top-of-the- line treads, and the machines to bond them to old tires, to franchised retreading shops. Roy Carver founded the enterprise in Muscatine, Iowa, 30 years ago after acquiring the rights to a retreading process from a German inventor. To this day Bandag claims to produce a longer-lasting retread than competitors. Carver's son M.G. is now chairman, and the family owns 30% of the common stock. Bandag treads have a grip on roughly 50% of the $700-million-a-year domestic retreading market. But the market is growing only about 5% a year. So the company is expanding overseas, where sales, helped by the weakening dollar, have been increasing about 20% annually. Thomas Dvorchak, Bandag's chief financial officer, credits the franchisee system with the big growth: ''We can pick the best people because we never sell through nonfranchisees, and we don't charge franchisees a fee up front.'' Indeed. In the past five years Bandag's return on shareholders' equity has averaged more than 25% annually, and earnings have nearly doubled to $3.90 per share. George Brophy, 53, chief executive of Morgan Products Ltd., calls his five- year-old company ''a classic leveraged buyout.'' Morgan, a manufacturer of top-quality wooden doors for homes and the leading distributor of Andersen windows, used to be a division of Combustion Engineering. Brophy once was chief operating officer of U.S. Industries Inc., since bought by British- controlled Hanson Industries. He long wanted a ship of his own. He thought the assets of Morgan were underutilized and tried unsuccessfully to buy the company in 1972 and 1980. But in 1983 Combustion Engineering began restructuring, and Brophy got his prize for $2 million in equity and $58 million in debt. Brophy's first act was to hire three top operating executives from Masonite Corp. ''The four of us all had more than 25 years of experience each in specialty building materials,'' he says, ''so we knew how to hit the deck running.'' In their first year in business, the group paid off a quarter of the debt, partly by speeding the rate of inventory turnover. Pleased with that performance, Brophy instituted an incentive system based in part on controlling those inventories. Top executives also own 7% of the stock. Brophy next opened the doors to wider marketing. Under Combustion Engineering, Morgan had been selling 60% of its product to home builders. Brophy figured that, with the aging of America's homes, renovation and repair offered a fast-growing area in which to win customers. This market is also less cyclical than the construction business. Now more than 50% of Morgan's revenues come from the repair and remodeling market, and sales have nearly tripled, to $417 million, since Brophy bought the company. La-Z-Boy Chair, a maker of put-your-feet-up-and-snooze recliners, awoke to modern marketing techniques in the early Eighties and has been anything but sedentary since. Founded in 1927 by the father of the present chairman, Charles Knabusch, 48, La-Z-Boy enjoyed steady but unspectacular growth from sales of its dependable but ungraceful chairs until 1982. That was the year Knabusch hired Patrick Norton of Ethan Allen Furniture, known for its marketing prowess, as senior vice president of sales and marketing. Norton, 66, recalls that when he arrived at the La-Z-Boy headquarters in Monroe, Michigan, he found ''a company with great plants, a great name, and a great product, but a bit short on marketing direction.'' Since then Knabusch and Norton have done two basic things. First, they redesigned their chairs with softer fabrics so they would look less like clunkers in a smoky men's club and more like living room furniture. That helped make the chairs more acceptable to women. Says Norton: ''We made them part of the human race, pieces of furniture rather than contraptions.'' Second, Knabusch and Norton weeded out retail dealers who wouldn't push the product -- in all, 42% of those on the roster in 1980. Unit sales of the recliners have tripled since 1982. At the same time, Knabusch started acquiring manufacturers of more traditional styles of furniture, which now account for about 25% of the company's $420 million in revenues. Insiders own 21% of the stock but, unlike other owner-managers, Knabusch believes that has made no difference in performance. ''The key factor to our growth is good marketing.'' Taking big risks, through heavy borrowing and dogged expansion in soft markets, has made the difference at Pilgrim's Pride and Florida Steel. Lonnie ''Bo'' Pilgrim, 59, founder and 80% owner with his family of Pilgrim's Pride, long ago put all his eggs in one basket -- the chicken business. Although he has never diversified, he moved adroitly to exploit the nation's growing passion for poultry by moving into the processed chicken products popular at fast-food outlets, where the margins are higher than they are in supermarkets. He has used debt to expand aggressively, a dicey approach in a business with volatile prices and profits. Pilgrim's long-term debt was equal to roughly 47% of total capital at the end of 1987. ''We use debt because I'm used to it,'' Pilgrim says. ''You can expand inventory and capacity a lot more using debt, and the costs of borrowing are diluted by the increase in volume. That works fine as long as you catch the market on the way up.'' So far, so good. Pilgrim's Pride, located in Pittsburg, Texas, has become the sixth-largest producer of chickens in the country. One of seven children, whose father died when he was 11, Pilgrim founded his company in 1945 at the age of 17. Last month he nearly negotiated a deal to sell out to Tyson Foods, and Tyson backed out. Now he says he'll remain in the business. If he doesn't change his mind or get caught with too many birds in a big downdraft, Pilgrim could land on the 500 before long. At Florida Steel, where insiders hold 8% of the stock, the motto is: ''Think long term.'' Florida's chairman, Edward Flom, 58, has been patiently piecing together a mini-empire of mini-mills, five so far, that mainly produce concrete reinforcing bars for roads, bridges, and buildings. ''We've never had a short focus,'' says Flom. ''We built a mill in the '83 recession and took the losses because we knew we would soon need it.'' Orders are now strong in Florida Steel's markets in the Southeast, and the mills are rolling out profits. Flom thinks the robust demand ''will last a long time.'' These days the company is spending heavily to upgrade mills and cut costs, and these expenditures should pay off well into the 1990s. Flom is also looking for acquisitions, but he's not in any hurry. ''We are very growth minded,'' he says. ''But it takes a lot of hard work.'' No doubt that sentiment would produce a chorus of ''amens'' among those aspiring to be rookies on the FORTUNE 500 next year.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: GROWING MIDSIZE COMPANIES HEADING TOWARD THE 500 DESCRIPTION: Information about growing midsize companies.