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.
Norfolk Southern (NSC)
Market Cap: $65.41 billion
Starting with a single route from Virginia to North Carolina, Norfolk Southern (NYSE: NSC) is a freight transportation company operating a major railroad network across the eastern United States.
Why Do We Pass on NSC?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 4.1 percentage points
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 8.4 percentage points
Norfolk Southern’s stock price of $291.04 implies a valuation ratio of 24.6x forward P/E. Check out our free in-depth research report to learn more about why NSC doesn’t pass our bar.
3M (MMM)
Market Cap: $78.53 billion
Producers of the first asthma inhaler, 3M Company (NYSE: MMM) is a global conglomerate known for products in industries like healthcare, safety, electronics, and consumer goods.
Why Should You Sell MMM?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Estimated sales growth of 3.6% for the next 12 months is soft and implies weaker demand
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
3M is trading at $149.59 per share, or 18.1x forward P/E. Dive into our free research report to see why there are better opportunities than MMM.
Baxter (BAX)
Market Cap: $9.27 billion
With a history dating back to 1931 and products used in over 100 countries, Baxter International (NYSE: BAX) provides essential healthcare products including dialysis therapies, IV solutions, infusion systems, surgical products, and patient monitoring technologies to hospitals and clinics worldwide.
Why Do We Avoid BAX?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Performance over the past five years shows each sale was less profitable, as its earnings per share fell by 6% annually
- Underwhelming -0.9% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its shrinking returns suggest its past profit sources are losing steam
At $18.00 per share, Baxter trades at 9.4x forward P/E. Read our free research report to see why you should think twice about including BAX in your portfolio.
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
