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.
Even among blue-chip stocks, not all investments are created equal - which is why we built StockStory to help you navigate the market. That said, here are three S&P 500 stocks to avoid and some better alternatives instead.
Royal Caribbean (RCL)
Market cap: $89.11 billion
Established in 1968, Royal Caribbean Cruises (NYSE: RCL) is a global cruise vacation company renowned for its innovative and exciting cruise experiences.
Why Are We Out on RCL?
- Performance surrounding its passenger cruise days has lagged its peers
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 9.7% for the last two years
- Underwhelming 9.7% return on capital reflects management’s difficulties in finding profitable growth opportunities
Royal Caribbean’s stock price of $333.24 implies a valuation ratio of 15.9x forward P/E. If you’re considering RCL for your portfolio, see our FREE research report to learn more.
3M (MMM)
Market cap: $100.2 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 Do We Pass on MMM?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Operating profits fell over the last five years as its sales dropped and it struggled to adjust its fixed costs
- Earnings per share have dipped by 2.8% annually over the past five years, which is concerning because stock prices follow EPS over the long term
At $193.75 per share, 3M trades at 18.4x forward P/E. Check out our free in-depth research report to learn more about why MMM doesn’t pass our bar.
Centene (CNC)
Market cap: $37.63 billion
Serving nearly 1 in 15 Americans through its government healthcare programs, Centene (NYSE: CNC) is a healthcare company that manages government-sponsored health insurance programs like Medicaid and Medicare for low-income and complex-needs populations.
Why Do We Think Twice About CNC?
- Underwhelming customer growth over the past two years shows the company faced challenges in winning new contracts
- Push for growth has led to negative returns on capital, signaling value destruction, and its falling returns suggest its earlier profit pools are drying up
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Centene is trading at $76.20 per share, or 12.8x forward P/E. To fully understand why you should be careful with CNC, 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 (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
