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.
Picking the right S&P 500 stocks requires more than just buying big names, and that’s where StockStory comes in. That said, here are two S&P 500 stocks positioned to outperform and one best left off your watchlist.
One stock to sell:
Gartner (IT)
Market cap: $12.49 billion
With over 2,500 research experts guiding organizations through complex technology landscapes, Gartner (NYSE: IT) provides research, advisory services, and conferences that help executives make better decisions about technology and other business priorities.
Why Do We Think Twice About IT?
- 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
- Anticipated sales growth of 2.1% for the next year implies demand will be shaky
- Free cash flow margin was stuck in limbo over the last five years
Gartner’s stock price of $200.79 implies a valuation ratio of 13x forward P/E. Check out our free in-depth research report to learn more about why IT doesn’t pass our bar.
Two stocks to watch:
Cadence Design Systems (CDNS)
Market cap: $85.45 billion
Powering the chips behind everything from smartphones to AI accelerators for over 35 years, Cadence Design Systems (NASDAQ: CDNS) provides essential computational software, hardware, and intellectual property used by engineers to design and verify advanced electronic systems and semiconductors.
Why Does CDNS Stand Out?
- Billings growth has averaged 20.3% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Software is difficult to replicate at scale and leads to a best-in-class gross margin of 85.7%
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
At $313.83 per share, Cadence Design Systems trades at 12.7x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Cardinal Health (CAH)
Market cap: $62.02 billion
Operating as a critical link in the healthcare supply chain since 1979, Cardinal Health (NYSE: CAH) distributes pharmaceuticals and manufactures medical products for hospitals, pharmacies, and healthcare providers across the global healthcare supply chain.
Why Are We Positive on CAH?
- 9% annual revenue growth over the last five years was better than the sector average, highlighting the value of its products and services
- Massive revenue base of $257.8 billion in a highly regulated sector makes the company difficult to replace, giving it meaningful negotiating power
- Share repurchases over the last five years enabled its annual earnings per share growth of 16.9% to outpace its revenue gains
Cardinal Health is trading at $269.40 per share, or 20.2x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-quality stocks for all market conditions
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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 Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
