The S&P 500 (^GSPC) is home to the biggest and most well-known companies in the market, making it a go-to index for investors seeking stability. But not all large-cap stocks are created equal - some are struggling with slowing growth, declining margins, or increased competition.
Picking the right S&P 500 stocks requires more than just buying big names, and that’s where StockStory comes in. That said, here are three S&P 500 stocks that don’t make the cut and some better choices instead.
Lamb Weston (LW)
Market Cap: $7.17 billion
Best known for its Grown in Idaho brand, Lamb Weston (NYSE: LW) produces and distributes potato products such as frozen french fries and mashed potatoes.
Why Does LW Give Us Pause?
- Projected sales are flat for the next 12 months, implying demand will slow from its three-year trend
- Efficiency has decreased over the last year as its operating margin fell by 5 percentage points
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Lamb Weston’s stock price of $50.60 implies a valuation ratio of 14.8x forward P/E. To fully understand why you should be careful with LW, check out our full research report (it’s free).
Verizon (VZ)
Market Cap: $185.1 billion
Formed in 1984 as Bell Atlantic after the breakup of Bell System into seven companies, Verizon (NYSE: VZ) is a telecom giant providing a range of communications and internet services.
Why Should You Sell VZ?
- Weak customer trends over the past two years suggest it may need to improve its products, pricing, or go-to-market strategy
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 2.2 percentage points over the next year
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $43.93 per share, Verizon trades at 9.3x forward P/E. Read our free research report to see why you should think twice about including VZ in your portfolio.
Thermo Fisher (TMO)
Market Cap: $154 billion
With over 14,000 sales personnel and a portfolio spanning more than 2,500 technology manufacturers, Thermo Fisher Scientific (NYSE: TMO) provides scientific equipment, reagents, consumables, software, and laboratory services to pharmaceutical, biotech, academic, and healthcare customers worldwide.
Why Are We Wary of TMO?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 10 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Thermo Fisher is trading at $407.75 per share, or 17.3x forward P/E. Dive into our free research report to see why there are better opportunities than TMO.
Stocks That Overcame Trump’s 2018 Tariffs
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
