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 are three S&P 500 stocks to avoid and some better alternatives instead.
Best Buy (BBY)
Market Cap: $19.04 billion
With humble beginnings as a stereo equipment seller, Best Buy (NYSE:BBY) now sells a broad selection of consumer electronics, appliances, and home office products.
Why Do We Avoid BBY?
- Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 22.6%
Best Buy is trading at $90.67 per share, or 12.5x forward P/E. To fully understand why you should be careful with BBY, check out our full research report (it’s free).
Fortive (FTV)
Market Cap: $16.52 billion
Taking its name from the Latin root of "strong", Fortive (NYSE:FTV) manufactures products and develops industrial software for numerous industries.
Why Are We Bearish on FTV?
- Sales tumbled by 3.1% annually over the last five years, showing market trends are working against it during this cycle
- Earnings per share have contracted by 8.3% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- ROIC of 5.5% reflects management’s challenges in identifying attractive investment opportunities
At $54.70 per share, Fortive trades at 17.5x forward P/E. Check out our free in-depth research report to learn more about why FTV doesn’t pass our bar.
Kroger (KR)
Market Cap: $34.86 billion
With a sprawling network of over 2,400 locations offering digital pickup services, Kroger (NYSE:KR) operates supermarkets, pharmacies, and fuel centers across 35 states, offering customers groceries, household items, and private-label products.
Why Are We Cautious About KR?
- Products fail to spark excitement with consumers, as seen in its flat sales over the last three years
- Limited expansion of stores suggests it’s prioritizing efficiency over growth at this stage
- Gross margin of 23.9% is an output of its commoditized inventory
Kroger’s stock price of $58.72 implies a valuation ratio of 10.8x forward P/E. Read our free research report to see why you should think twice about including KR in your portfolio.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.