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.
Picking the right S&P 500 stocks requires more than just buying big names, and that’s where StockStory comes in. That said, here are two S&P 500 stocks positioned to outperform and one best left off your watchlist.
One Stock to Sell:
Otis (OTIS)
Market Cap: $34.77 billion
Credited with inventing the first hydraulic passenger elevator, Otis Worldwide (NYSE: OTIS) is an elevator and escalator manufacturing, installation and service company.
Why Are We Cautious About OTIS?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Anticipated sales growth of 4.1% for the next year implies demand will be shaky
- Free cash flow margin shrank by 1.9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Otis’s stock price of $87.70 implies a valuation ratio of 20.5x forward P/E. To fully understand why you should be careful with OTIS, check out our full research report (it’s free).
Two Stocks to Watch:
Paychex (PAYX)
Market Cap: $50.08 billion
Once known as the go-to service for small business payroll needs, Paychex (NASDAQ: PAYX) provides payroll processing, HR services, employee benefits administration, and insurance solutions to small and medium-sized businesses.
Why Does PAYX Stand Out?
- Sales outlook for the upcoming 12 months calls for 17.5% growth, an acceleration from its three-year trend
- Excellent operating margin of 39.6% highlights the efficiency of its business model
- PAYX is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $139.42 per share, Paychex trades at 7.7x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
The Trade Desk (TTD)
Market Cap: $25.68 billion
Built as an alternative to "walled garden" advertising ecosystems, The Trade Desk (NASDAQ: TTD) provides a cloud-based platform that helps advertisers and agencies plan, manage, and optimize digital advertising campaigns across multiple channels and devices.
Why Are We Positive On TTD?
- Billings growth has averaged 24.2% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
- Highly efficient business model is illustrated by its impressive 17.7% operating margin, and its rise over the last year was fueled by some leverage on its fixed costs
The Trade Desk is trading at $52.24 per share, or 8.5x forward price-to-sales. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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 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 Comfort Systems (+782% 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
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