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 that don’t make the cut and some better choices instead.
Western Digital (WDC)
Market Cap: $17.44 billion
Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.
Why Should You Dump WDC?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 7.9% annually over the last five years
- High input costs result in an inferior gross margin of 14.5% that must be offset through higher volumes
- Operating margin of 4.3% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
Western Digital’s stock price of $49 implies a valuation ratio of 10.4x forward P/E. If you’re considering WDC for your portfolio, see our FREE research report to learn more.
Wynn Resorts (WYNN)
Market Cap: $10.02 billion
Founded by the former Mirage Resorts CEO, Wynn Resorts (NASDAQ: WYNN) is a global developer and operator of high-end hotels and casinos, known for its luxurious properties and premium guest services.
Why Are We Cautious About WYNN?
- Sales trends were unexciting over the last five years as its 3.3% annual growth was below the typical consumer discretionary company
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
- 5× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $95.69 per share, Wynn Resorts trades at 19.7x forward P/E. Read our free research report to see why you should think twice about including WYNN in your portfolio.
CBRE (CBRE)
Market Cap: $38.65 billion
Established in 1906, CBRE (NYSE: CBRE) is one of the largest commercial real estate services firms in the world.
Why Are We Out on CBRE?
- Annual sales growth of 8.3% over the last five years lagged behind its consumer discretionary peers as its large revenue base made it difficult to generate incremental demand
- Low free cash flow margin of 2.6% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging
CBRE is trading at $131.61 per share, or 21.5x forward P/E. To fully understand why you should be careful with CBRE, check out our full research report (it’s free).
Stocks We Like 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 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 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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.
