The S&P 500 (^GSPC) is often seen as a benchmark for strong businesses, but that doesn’t mean every stock is worth owning. Some companies face significant challenges, whether it’s stagnating growth, heavy debt, or disruptive new competitors.
Picking the right S&P 500 stocks requires more than just buying big names, and that’s where StockStory comes in. Keeping that in mind, here are three S&P 500 stocks to steer clear of and a few alternatives to consider.
Salesforce (CRM)
Market Cap: $276.4 billion
Launched in 1999 from a rented one-bedroom apartment in San Francisco by Marc Benioff and his three co-founders, Salesforce (NYSE: CRM) is a software-as-a-service platform that helps companies access, manage, and share sales information such as leads.
Why Does CRM Fall Short?
- Sizable revenue base leads to growth challenges as its 12.7% annual revenue increases over the last three years fell short of other software companies
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 8.1% underwhelmed
- Estimated sales growth of 7.6% for the next 12 months implies demand will slow from its three-year trend
At $287.98 per share, Salesforce trades at 6.9x forward price-to-sales. If you’re considering CRM for your portfolio, see our FREE research report to learn more.
Lennar (LEN)
Market Cap: $28.73 billion
One of the largest homebuilders in America, Lennar (NYSE: LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.
Why Are We Out on LEN?
- Backlog has dropped by 22.1% on average over the past two years, suggesting it’s losing orders as competition picks up
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 10.8% annually
- Free cash flow margin dropped by 13.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Lennar is trading at $110.23 per share, or 8.5x forward P/E. To fully understand why you should be careful with LEN, check out our full research report (it’s free).
IQVIA (IQV)
Market Cap: $25.08 billion
Created from the 2016 merger of Quintiles (a clinical research organization) and IMS Health (a healthcare data specialist), IQVIA (NYSE: IQV) provides clinical research services, data analytics, and technology solutions to help pharmaceutical companies develop and market medications more effectively.
Why Are We Cautious About IQV?
- Annual sales growth of 3.4% over the last two years lagged behind its healthcare peers as its large revenue base made it difficult to generate incremental demand
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 3 percentage points
IQVIA’s stock price of $144.95 implies a valuation ratio of 11.9x forward P/E. Check out our free in-depth research report to learn more about why IQV doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 Kadant (+351% five-year return). Find your next big winner with StockStory today for free.
