The S&P 500 (^GSPC) is home to the biggest and most well-known companies in the market, making it a go-to index for investors seeking stability. But not all large-cap stocks are created equal - some are struggling with slowing growth, declining margins, or increased competition.
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 is one S&P 500 stock that is positioned to outperform and two best left off your watchlist.
Two Stocks to Sell:
Hilton (HLT)
Market Cap: $77.82 billion
Founded in 1919, Hilton Worldwide (NYSE: HLT) is a global hospitality company with a portfolio of hotel brands.
Why Should You Sell HLT?
- Weak revenue per room over the past two years indicates challenges in maintaining pricing power and occupancy rates
- Poor expense management has led to an operating margin of 22.1% that is below the industry average
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 2.4 percentage points
Hilton’s stock price of $335.59 implies a valuation ratio of 36.2x forward P/E. If you’re considering HLT for your portfolio, see our FREE research report to learn more.
D.R. Horton (DHI)
Market Cap: $43.79 billion
One of the largest homebuilding companies in the U.S., D.R. Horton (NYSE: DHI) builds a variety of new construction homes across multiple markets.
Why Do We Think DHI Will Underperform?
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 7.6% declines over the past two years
- Earnings per share have dipped by 14.8% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Eroding returns on capital suggest its historical profit centers are aging
At $158.70 per share, D.R. Horton trades at 14.2x forward P/E. Dive into our free research report to see why there are better opportunities than DHI.
One Stock to Watch:
Berkshire Hathaway (BRK.A)
Market Cap: $1.05 trillion
Led by legendary investor Warren Buffett since 1965, transforming it from a struggling textile manufacturer into a corporate giant, Berkshire Hathaway (NYSE: BRK.A) is a diversified holding company that owns businesses across insurance, railroads, utilities, manufacturing, retail, and services sectors.
Why Is BRK.A on Our Radar?
- Earnings per share grew by 18.9% annually over the last two years, comfortably beating the peer group average
- Impressive 15.9% annual tangible book value per share growth over the last five years indicates it’s building equity value this cycle
- ROE punches in at 13.2%, illustrating management’s expertise in identifying profitable investments
Berkshire Hathaway is trading at $760,947 per share, or 23.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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