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. Keeping that in mind, here are three S&P 500 stocks to steer clear of and a few alternatives to consider.
Microchip Technology (MCHP)
Market Cap: $42.71 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 Do We Pass on MCHP?
- Annual sales declines of 3.8% for the past five years show its products and services struggled to connect with the market during this cycle
- Sales were less profitable over the last five years as its earnings per share fell by 17.7% annually, worse than its revenue declines
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 15.9 percentage points
Microchip Technology’s stock price of $78.64 implies a valuation ratio of 33.2x forward P/E. If you’re considering MCHP for your portfolio, see our FREE research report to learn more.
Packaging Corporation of America (PKG)
Market Cap: $21.9 billion
Founded in 1959, Packaging Corporation of America (NYSE: PKG) produces containerboard and corrugated packaging products as well as displays and package protection.
Why Are We Wary of PKG?
- Disappointing unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 3.7 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $245.06 per share, Packaging Corporation of America trades at 22.6x forward P/E. Dive into our free research report to see why there are better opportunities than PKG.
DaVita (DVA)
Market Cap: $10.01 billion
With over 2,600 dialysis centers across the United States and a presence in 13 countries, DaVita (NYSE:DVA) operates a network of dialysis centers providing treatment and care for patients with chronic kidney disease and end-stage kidney disease.
Why Do We Think Twice About DVA?
- Flat treatments over the past two years imply it may need to invest in improvements to get back on track
- Estimated sales growth of 2.4% for the next 12 months implies demand will slow from its two-year trend
- Free cash flow margin shrank by 1.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
DaVita is trading at $145.55 per share, or 10.2x forward P/E. Read our free research report to see why you should think twice about including DVA in your portfolio.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.