3 S&P 500 Stocks We Approach with Caution

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.

Autodesk (ADSK)

Market Cap: $58.52 billion

Starting with AutoCAD in the 1980s and evolving into a comprehensive design ecosystem, Autodesk (NASDAQ:ADSK) provides software solutions for architecture, engineering, construction, manufacturing, and entertainment industries to design, simulate, and visualize projects.

Why Does ADSK Fall Short?

1. Annual revenue growth of 13.5% over the last five years was below our standards for the software sector
2. Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
3. Static operating margin over the last year shows it couldn’t become more efficient

Autodesk’s stock price of $276.96 implies a valuation ratio of 8.1x forward price-to-sales. Read our free research report to see why you should think twice about including ADSK in your portfolio.

Western Digital (WDC)

Market Cap: $64.17 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 Do We Think Twice About WDC?

1. Sales tumbled by 9.4% annually over the last five years, showing market trends are working against its favor during this cycle
2. Gross margin of 14.9% reflects its high production costs
3. Underwhelming 6.6% return on capital reflects management’s difficulties in finding profitable growth opportunities

At $185.95 per share, Western Digital trades at 24.4x forward P/E. If you’re considering WDC for your portfolio, see our FREE research report to learn more.

Zimmer Biomet (ZBH)

Market Cap: $18.65 billion

With a history dating back to 1927 and a presence in over 100 countries worldwide, Zimmer Biomet (NYSE:ZBH) designs and manufactures orthopedic products including knee and hip replacements, surgical tools, and robotic technologies for joint reconstruction and spine surgeries.

Why Does ZBH Give Us Pause?

1. Sales trends were unexciting over the last five years as its 3% annual growth was below the typical healthcare company
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 1 percentage points
3. Low returns on capital reflect management’s struggle to allocate funds effectively

Zimmer Biomet is trading at $93.87 per share, or 11.1x forward P/E. Dive into our free research report to see why there are better opportunities than ZBH.

Stocks We Like More

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. Check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.