Megacap stocks are behemoths that set the tone for their industries, and their massive scale typically leads to wide moats. However, the downside is that most have already exploited their existing market opportunities and must invest heavily to expand further, a risky proposition.
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. That said, here is one industry titan with attractive long-term potential and two whose existing offerings may be tapped out.
Two Mega-Cap Stocks to Sell:
PepsiCo (PEP)
Market Cap: $201.1 billion
With a history that goes back more than a century, PepsiCo (NASDAQ: PEP) is a household name in food and beverages today and best known for its flagship soda.
Why Are We Wary of PEP?
- Falling unit sales over the past two years imply it may need to invest in product improvements to get back on track
- Estimated sales growth of 3.2% for the next 12 months is soft and implies weaker demand
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 2.1 percentage points
PepsiCo is trading at $147.00 per share, or 18.1x forward P/E. Dive into our free research report to see why there are better opportunities than PEP.
Wells Fargo (WFC)
Market Cap: $262.1 billion
Founded during the California Gold Rush in 1852 to provide banking and express delivery services to miners and merchants, Wells Fargo (NYSE: WFC) is a diversified financial services company that provides banking, lending, investment, and wealth management services to individuals and businesses.
Why Does WFC Worry Us?
- Large revenue base makes it harder to expand quickly, and its annual net interest income growth of 1.8% over the last five years was below our standards for the banking sector
- Anticipated net interest income growth of 5.1% for the next year implies demand will be shaky
- Net interest margin dropped by 36.7 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market
Wells Fargo’s stock price of $81.83 implies a valuation ratio of 1.6x forward P/B. Check out our free in-depth research report to learn more about why WFC doesn’t pass our bar.
One Mega-Cap Stock to Watch:
McDonald's (MCD)
Market Cap: $226.2 billion
With nicknames spanning Mickey D's in the U.S. to Makku in Japan, McDonald’s (NYSE: MCD) is a fast-food behemoth known for its convenience and broken ice cream machines.
Why Should MCD Be on Your Watchlist?
- Aggressive expansion of new stores reflects an offensive push to quickly grow and sell in markets where it has few or no locations
- Highly-profitable franchise model results in strong unit economics and a best-in-class gross margin of 57%
- MCD is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $316.75 per share, McDonald's trades at 24.8x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive 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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