"Too big to fail" is how we would describe the megacap stocks in this article today. While they will likely stand the test of time, it’s not all sunshine and rainbows as their scale can limit their ability to find new sources of growth.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you find high-quality companies that can grow their earnings no matter what. Keeping that in mind, here is one industry titan whose competitive advantages creates flywheel effects and two that could be stalling.
Two Mega-Cap Stocks to Sell:
AbbVie (ABBV)
Market Cap: $346.8 billion
Born from a 2013 spinoff of Abbott Laboratories' pharmaceutical business, AbbVie (NYSE: ABBV) is a biopharmaceutical company that develops and markets medications for autoimmune diseases, cancer, neurological disorders, and other complex health conditions.
Why Do We Think Twice About ABBV?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Costs have risen faster than its revenue over the last two years, causing its adjusted operating margin to decline by 9.2 percentage points
AbbVie is trading at $196 per share, or 15.4x forward P/E. Dive into our free research report to see why there are better opportunities than ABBV.
Abbott Laboratories (ABT)
Market Cap: $230.7 billion
With roots dating back to 1888 when founder Dr. Wallace Abbott began producing precise, dosage-form medications, Abbott Laboratories (NYSE: ABT) develops and sells a diverse range of healthcare products including medical devices, diagnostics, nutrition products, and branded generic pharmaceuticals.
Why Are We Hesitant About ABT?
- 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% for the last two years
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- 4.7 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
At $132.40 per share, Abbott Laboratories trades at 24.9x forward P/E. If you’re considering ABT for your portfolio, see our FREE research report to learn more.
One Mega-Cap Stock to Buy:
GE Aerospace (GE)
Market Cap: $222.8 billion
One of the original 12 companies on the Dow Jones Industrial Average, General Electric (NYSE: GE) is a multinational conglomerate providing technologies for various sectors including aviation, power, renewable energy, and healthcare.
Why Should You Buy GE?
- Annual revenue growth of 20.1% over the last two years was superb and indicates its market share increased during this cycle
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its recently improved profitability means it has even more resources to invest or distribute
- Returns on capital are growing as management capitalizes on its market opportunities
GE Aerospace’s stock price of $208.84 implies a valuation ratio of 37.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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 9 Market-Beating Stocks. 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
