While the S&P 500 (^GSPC) includes industry leaders, not every stock in the index is a winner. Some companies are past their prime, weighed down by poor execution, weak financials, or structural headwinds.
Some large-cap stocks are past their peak, and StockStory is here to help you separate the winners from the laggards. Keeping that in mind, here is one S&P 500 stock that is positioned to outperform and two that could be in trouble.
Two Stocks to Sell:
Caterpillar (CAT)
Market Cap: $164.4 billion
With its iconic yellow machinery working on construction sites, Caterpillar (NYSE: CAT) manufactures construction equipment like bulldozers, excavators, and parts and maintenance services.
Why Are We Wary of CAT?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
- High input costs result in an inferior gross margin of 29% that must be offset through higher volumes
Caterpillar is trading at $354.94 per share, or 18x forward P/E. To fully understand why you should be careful with CAT, check out our full research report (it’s free).
Bristol-Myers Squibb (BMY)
Market Cap: $95.59 billion
With roots dating back to 1887 and a transformative merger in 1989 that gave the company its current name, Bristol-Myers Squibb (NYSE: BMY) discovers, develops, and markets prescription medications for serious diseases including cancer, blood disorders, immunological conditions, and cardiovascular diseases.
Why Are We Cautious About BMY?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 1.9% for the last two years
- Estimated sales decline of 4.4% for the next 12 months implies a challenging demand environment
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $47.24 per share, Bristol-Myers Squibb trades at 7.1x forward P/E. Read our free research report to see why you should think twice about including BMY in your portfolio.
One Stock to Watch:
Ross Stores (ROST)
Market Cap: $45.94 billion
Selling excess inventory or overstocked items from other retailers, Ross Stores (NASDAQ: ROST) is an off-price concept that sells apparel and other goods at prices much lower than department stores.
Why Are We Positive On ROST?
- Offensive push to build new stores and attack its untapped market opportunities is backed by its same-store sales growth
- Comparable store sales rose by 3.5% on average over the past two years, demonstrating its ability to drive increased spending at existing locations
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its rising returns show it’s making even more lucrative bets
Ross Stores’s stock price of $140.96 implies a valuation ratio of 21.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.
