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.
Even among blue-chip stocks, not all investments are created equal - which is why we built StockStory to help you navigate the market. That said, here are three S&P 500 stocks to avoid and some better alternatives instead.
Walmart (WMT)
Market Cap: $1.04 trillion
Known for its large-format Supercenters, Walmart (NASDAQ: WMT) is a retail pioneer that serves a budget-conscious consumer who is looking for a wide range of products under one roof.
Why Does WMT Give Us Pause?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 5.3% over the last three years was below our standards for the consumer retail sector
- Gross margin of 24.9% is an output of its commoditized inventory
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
Walmart is trading at $130.21 per share, or 45.3x forward P/E. To fully understand why you should be careful with WMT, check out our full research report (it’s free).
Campbell's (CPB)
Market Cap: $6.11 billion
With its iconic canned soup as its cornerstone product, Campbell's (NASDAQ: CPB) is a packaged food company with an illustrious portfolio of brands.
Why Are We Out on CPB?
- Shrinking unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Forecasted revenue decline of 2.8% for the upcoming 12 months implies demand will fall off a cliff
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 5.1% annually
At $20.58 per share, Campbell's trades at 9.7x forward P/E. If you’re considering CPB for your portfolio, see our FREE research report to learn more.
Bunge Global (BG)
Market Cap: $24.76 billion
With origins dating back to 1818 and operations spanning both hemispheres to balance seasonal harvests, Bunge Global (NYSE: BG) is an agribusiness and food company that processes oilseeds, grains, and other agricultural commodities into vegetable oils, protein meals, flours, and specialty ingredients.
Why Is BG Not Exciting?
- 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 6.5% for the last three years
- Earnings per share fell by 17% annually over the last three years while its revenue grew, showing its incremental sales were much less profitable
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Bunge Global’s stock price of $128.10 implies a valuation ratio of 12.3x forward P/E. To fully understand why you should be careful with BG, check out our full research report (it’s free).
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