Megacap stocks dominate their sectors and their actions influence economies worldwide. The flip side though is that their sheer size means they have less room for explosive growth as scale works against them.
Sound complicated? With StockStory, it doesn’t have to be. Our job is to find you high-quality companies that can win regardless of the conditions. That said, here are three industry titans whose existing offerings may be tapped out and some other investments you should look into instead.
Caterpillar (CAT)
Market Cap: $259.1 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 Does CAT Worry Us?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.4% annually over the last two years
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Earnings per share have contracted by 2% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
At $554.42 per share, Caterpillar trades at 28.2x forward P/E. To fully understand why you should be careful with CAT, check out our full research report (it’s free for active Edge members).
RTX (RTX)
Market Cap: $233.2 billion
Originally focused on refrigeration technology, Raytheon (NSYE:RTX) provides a a variety of products and services to the aerospace and defense industries.
Why Are We Wary of RTX?
- Estimated sales growth of 5.1% for the next 12 months implies demand will slow from its two-year trend
- Poor expense management has led to an operating margin of 7.5% that is below the industry average
- Underwhelming 4.1% return on capital reflects management’s difficulties in finding profitable growth opportunities
RTX’s stock price of $175.02 implies a valuation ratio of 27.7x forward P/E. If you’re considering RTX for your portfolio, see our FREE research report to learn more.
IBM (IBM)
Market Cap: $285 billion
With a corporate history spanning over a century and once known for its iconic mainframe computers, IBM (NYSE: IBM) provides hybrid cloud computing platforms, AI solutions, consulting services, and enterprise infrastructure to help businesses modernize their operations.
Why Are We Hesitant About IBM?
- Annual sales growth of 1.3% over the last five years lagged behind its business services peers as its large revenue base made it difficult to generate incremental demand
- Earnings per share lagged its peers over the last five years as they only grew by 4.2% annually
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
IBM is trading at $304.93 per share, or 26.1x forward P/E. Read our free research report to see why you should think twice about including IBM in your portfolio.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
