While the S&P 500 (^GSPC) includes industry leaders, not every stock in the index is a winner. Some companies are past their prime, weighed down by poor execution, weak financials, or structural headwinds.
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 to avoid and some better alternatives instead.
Analog Devices (ADI)
Market Cap: $113 billion
Founded by two MIT graduates, Ray Stata and Matthew Lorber in 1965, Analog Devices (NASDAQ:ADI) is one of the largest providers of high performance analog integrated circuits used mainly in industrial end markets, along with communications, autos, and consumer devices.
Why Does ADI Fall Short?
- Sales tumbled by 12.7% annually over the last two years, showing market trends are working against its favor during this cycle
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 7.3 percentage points
- ROIC of 6.4% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
Analog Devices’s stock price of $227.87 implies a valuation ratio of 29x forward P/E. Check out our free in-depth research report to learn more about why ADI doesn’t pass our bar.
General Motors (GM)
Market Cap: $46.08 billion
Founded in 1908 by William C. Durant, General Motors (NYSE:GM) offers a range of vehicles and automobiles through brands such as Chevrolet, Buick, GMC, and Cadillac.
Why Is GM Not Exciting?
- Disappointing unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Sales are projected to tank by 5.3% over the next 12 months as demand evaporates
- Gross margin of 12.5% is below its competitors, leaving less money to invest in areas like marketing and R&D
At $47.92 per share, General Motors trades at 4.4x forward P/E. To fully understand why you should be careful with GM, check out our full research report (it’s free).
Zimmer Biomet (ZBH)
Market Cap: $18.37 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 Are We Cautious About ZBH?
- Flat sales over the last five years suggest it must find different ways to grow during this cycle
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Zimmer Biomet is trading at $93.25 per share, or 11.2x forward P/E. Read our free research report to see why you should think twice about including ZBH in your portfolio.
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 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).
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.