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.
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 is one S&P 500 stock that is positioned to outperform and two best left off your watchlist.
Two Stocks to Sell:
Microchip Technology (MCHP)
Market Cap: $50.38 billion
Spun out from General Instrument in 1987, Microchip Technology (NASDAQ: MCHP) is a leading provider of microcontrollers and integrated circuits used mainly in the automotive world, especially in electric vehicles and their charging devices.
Why Should You Dump MCHP?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 21.4% annually over the last two years
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 13.1% annually, worse than its revenue
- Free cash flow margin dropped by 17.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $95.63 per share, Microchip Technology trades at 29.5x forward P/E. Dive into our free research report to see why there are better opportunities than MCHP.
MGM Resorts (MGM)
Market Cap: $12.08 billion
Operating several properties on the Las Vegas Strip, MGM Resorts (NYSE: MGM) is a global hospitality and entertainment company known for its resorts and casinos.
Why Do We Steer Clear of MGM?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 3.1% over the last two years was below our standards for the consumer discretionary sector
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- High net-debt-to-EBITDA ratio of 12× increases the risk of forced asset sales or dilutive financing if operational performance weakens
MGM Resorts is trading at $49.27 per share, or 24.7x forward P/E. To fully understand why you should be careful with MGM, check out our full research report (it’s free).
One Stock to Buy:
Arthur J. Gallagher (AJG)
Market Cap: $56.76 billion
Founded in 1927 and operating in approximately 130 countries through direct operations and correspondent networks, Arthur J. Gallagher (NYSE: AJG) provides insurance brokerage, reinsurance, consulting, and third-party claims settlement services to businesses and individuals worldwide.
Why Should You Buy AJG?
- Impressive 19.1% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 18.5% annually
- AJG is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Arthur J. Gallagher’s stock price of $218.80 implies a valuation ratio of 16.1x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
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.
