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.
Picking the right S&P 500 stocks requires more than just buying big names, and that’s where StockStory comes in. That said, here is one S&P 500 stock that is positioned to outperform and two that could be in trouble.
Two Stocks to Sell:
Seagate Technology (STX)
Market Cap: $23.1 billion
The developer of the original 5.25inch hard disk drive, Seagate (NASDAQ: STX) is a leading producer of data storage solutions, including hard drives and Solid State Drives (SSDs) used in PCs and data centers.
Why Does STX Fall Short?
- Sales tumbled by 3.8% annually over the last five years, showing market trends are working against its favor during this cycle
- High input costs result in an inferior gross margin of 28.4% that must be offset through higher volumes
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Seagate Technology’s stock price of $109.60 implies a valuation ratio of 12.2x forward P/E. Read our free research report to see why you should think twice about including STX in your portfolio.
Hormel Foods (HRL)
Market Cap: $16.19 billion
Best known for its SPAM brand, Hormel (NYSE: HRL) is a packaged foods company with products that span meat, poultry, shelf-stable foods, and spreads.
Why Are We Cautious About HRL?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its product strategy
- Gross margin of 16.7% is below its competitors, leaving less money to invest in areas like marketing and production facilities
- Sales over the last three years were less profitable as its earnings per share fell by 4.8% annually while its revenue was flat
Hormel Foods is trading at $29.45 per share, or 17.2x forward P/E. Check out our free in-depth research report to learn more about why HRL doesn’t pass our bar.
One Stock to Watch:
Autodesk (ADSK)
Market Cap: $63.11 billion
Founded in 1982 by John Walker and growing into one of the industry's behemoths, Autodesk (NASDAQ: ADSK) makes computer-aided design (CAD) software for engineering, construction, and architecture companies.
Why Does ADSK Stand Out?
- Average billings growth of 23.1% over the last year enhances its liquidity and shows there is steady demand for its products
- Software is difficult to replicate at scale and results in a best-in-class gross margin of 91.6%
- Disciplined cost controls and effective management resulted in a strong trailing 12-month operating margin of 20.3%
At $304.79 per share, Autodesk trades at 9x forward price-to-sales. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even 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 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free.
