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.
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 steer clear of and a few alternatives to consider.
Akamai (AKAM)
Market Cap: $21.94 billion
With a massive distributed network spanning 4,100+ points of presence in nearly 130 countries, Akamai Technologies (NASDAQ: AKAM) provides a global distributed cloud platform that helps businesses deliver, secure, and optimize their digital experiences online.
Why Do We Steer Clear of AKAM?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 6.8% underwhelmed
- Gross margin of 58.3% is way below its competitors, leaving less money to invest in areas like marketing and R&D
- Free cash flow margin is forecasted to shrink by 25.3 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
Akamai’s stock price of $149.88 implies a valuation ratio of 5.1x forward price-to-sales. Read our free research report to see why you should think twice about including AKAM in your portfolio.
Hormel Foods (HRL)
Market Cap: $10.86 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 Should You Sell HRL?
- Shrinking unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Easily substituted products (and therefore stiff competition) result in an inferior gross margin of 16.2% that must be offset through higher volumes
- Earnings per share fell by 8.8% annually over the last three years while its revenue was flat, showing each sale was less profitable
At $19.81 per share, Hormel Foods trades at 13.3x forward P/E. Check out our free in-depth research report to learn more about why HRL doesn’t pass our bar.
T. Rowe Price (TROW)
Market Cap: $21.86 billion
Founded in 1937 by Thomas Rowe Price Jr., who pioneered the growth stock investing approach, T. Rowe Price (NASDAQ: TROW) is an investment management firm that offers mutual funds, advisory services, and retirement planning solutions to individuals and institutions.
Why Are We Cautious About TROW?
- Sales trends were unexciting over the last five years as its 2.6% annual growth was below the typical financials company
- Earnings per share fell by 1.4% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
T. Rowe Price is trading at $102.50 per share, or 10.9x forward P/E. To fully understand why you should be careful with TROW, check out our full research report (it’s free).
Stocks We Like More
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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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
