3 S&P 500 Stocks That Concern Us

The S&P 500 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. Keeping that in mind, here are three S&P 500 stocks to avoid and some better alternatives instead.

Hormel Foods (HRL)

Market Cap: $16.84 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 Does HRL Give Us Pause?

1. Shrinking unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
2. Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 16.7%
3. Earnings per share fell by 4.9% annually over the last three years while its revenue was flat, showing each sale was less profitable

Hormel Foods’s stock price of $31.36 implies a valuation ratio of 17.9x forward price-to-earnings. Read our free research report to see why you should think twice about including HRL in your portfolio.

FOX (FOXA)

Market Cap: $24.91 billion

Founded in 1915, Fox (NASDAQ:FOXA) is a diversified media company, operating prominent cable news, television broadcasting, and digital media platforms.

Why Is FOXA Not Exciting?

1. Sizable revenue base leads to growth challenges as its 3.1% annual revenue increases over the last two years fell short of other consumer discretionary companies
2. Anticipated sales growth of 4.3% for the next year implies demand will be shaky

FOX is trading at $52.24 per share, or 14.8x forward price-to-earnings. To fully understand why you should be careful with FOXA, check out our full research report (it’s free).

West Pharmaceutical Services (WST)

Market Cap: $16.01 billion

Founded in 1923 and serving as a critical link in the pharmaceutical supply chain, West Pharmaceutical Services (NYSE:WST) manufactures specialized packaging, containment systems, and delivery devices for injectable drugs and healthcare products.

Why Are We Wary of WST?

1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
2. Efficiency has decreased over the last two years as its adjusted operating margin fell by 6.6 percentage points
3. Waning returns on capital imply its previous profit engines are losing steam

At $218.95 per share, West Pharmaceutical Services trades at 30.1x forward price-to-earnings. If you’re considering WST for your portfolio, see our FREE research report to learn more.

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 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.