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.
Some large-cap stocks are past their peak, and StockStory is here to help you separate the winners from the laggards. That said, here are three S&P 500 stocks to avoid and some better alternatives instead.
Microchip Technology (MCHP)
Market Cap: $31.31 billion
Spun out from General Instrument in 1987, Microchip Technology (NASDAQ: MCHP) is a leading provider of microcontrollers and integrated circuits used mainly in the automotive world, especially in electric vehicles and their charging devices.
Why Should You Dump MCHP?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.6% annually over the last five years
- Operating profits fell over the last five years as its sales dropped and it struggled to adjust its fixed costs
- Free cash flow margin dropped by 16 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $57.80 per share, Microchip Technology trades at 51.4x forward P/E. Check out our free in-depth research report to learn more about why MCHP doesn’t pass our bar.
News Corp (NWSA)
Market Cap: $16.82 billion
Established in 2013 after a restructuring, News Corp (NASDAQ: NWSA) is a multinational conglomerate known for its news publishing, broadcasting, digital media, and book publishing.
Why Are We Out on NWSA?
- Products and services aren't resonating with the market as its revenue declined by 2.5% annually over the last five years
- Projected sales growth of 2.5% for the next 12 months suggests sluggish demand
- ROIC of 6.3% reflects management’s challenges in identifying attractive investment opportunities
News Corp’s stock price of $28.29 implies a valuation ratio of 31.6x forward P/E. Dive into our free research report to see why there are better opportunities than NWSA.
Hologic (HOLX)
Market Cap: $13.85 billion
As a pioneer in 3D mammography technology that has revolutionized breast cancer detection, Hologic (NASDAQ: HOLX) develops and manufactures diagnostic products, medical imaging systems, and surgical devices focused primarily on women's health and wellness.
Why Are We Cautious About HOLX?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 23.2 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
Hologic is trading at $62.10 per share, or 14x forward P/E. Read our free research report to see why you should think twice about including HOLX in your portfolio.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
