3 S&P 500 Stocks We Approach with Caution

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.

Even among blue-chip stocks, not all investments are created equal - which is why we built StockStory to help you navigate the market. Keeping that in mind, here are three S&P 500 stocks that don’t make the cut and some better choices instead.

Best Buy (BBY)

Market Cap: $16.15 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 Does BBY Fall Short?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 22.4%
3. Subpar operating margin of 3.1% constrains its ability to invest in process improvements or effectively respond to new competitive threats

Best Buy’s stock price of $76.86 implies a valuation ratio of 12x forward P/E. Dive into our free research report to see why there are better opportunities than BBY.

Tapestry (TPR)

Market Cap: $23.79 billion

Originally founded as Coach, Tapestry (NYSE:TPR) is an American fashion conglomerate with a portfolio of luxury brands offering high-quality accessories and fashion products.

Why Are We Out on TPR?

1. Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3%
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $115.49 per share, Tapestry trades at 21.1x forward P/E. If you’re considering TPR for your portfolio, see our FREE research report to learn more.

Lockheed Martin (LMT)

Market Cap: $117.8 billion

Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE:LMT) specializes in defense, space, homeland security, and information technology products.

Why Should You Dump LMT?

1. New orders were hard to come by as its average backlog growth of 7.3% over the past two years underwhelmed
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 4.9% annually
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Lockheed Martin is trading at $504.58 per share, or 17.9x forward P/E. Read our free research report to see why you should think twice about including LMT in your portfolio.

Stocks We Like More

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Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

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