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While the S&P 500 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 are two S&P 500 stocks positioned to outperform and one that may struggle.

One Stock to Sell:

Norfolk Southern (NSC)

Market Cap: $48.42 billion

Starting with a single route from Virginia to North Carolina, Norfolk Southern (NYSE:NSC) is a freight transportation company operating a major railroad network across the eastern United States.

Why Do We Think NSC Will Underperform?

1. Weak unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases

2. Earnings per share have dipped by 7.6% annually over the past two years, which is concerning because stock prices follow EPS over the long term

3. Free cash flow margin shrank by 7.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Norfolk Southern’s stock price of $217.50 implies a valuation ratio of 16.3x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than NSC.

Two Stocks to Watch:

Lam Research (LRCX)

Market Cap: $83.62 billion

Founded in 1980 by David Lam, the man who pioneered semiconductor etching technology, Lam Research (NASDAQ:LRCX) is one of the leading providers of wafer fabrication equipment used to make semiconductors.

Why Does LRCX Stand Out?

1. Highly efficient business model is illustrated by its impressive 28.4% operating margin

2. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its improved cash conversion implies it’s becoming a less capital-intensive business

3. Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures

At $65.71 per share, Lam Research trades at 17.8x forward price-to-earnings. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

Humana (HUM)

Market Cap: $34.47 billion

With over 80% of its revenue derived from federal government contracts, Humana (NYSE:HUM) provides health insurance plans and healthcare services to approximately 17 million members, with a strong focus on Medicare Advantage plans for seniors.

Why Will HUM Beat the Market?

1. Annual revenue growth of 12.7% over the last five years beat the sector average and underscores the unique value of its offerings

2. Massive revenue base of $117.8 billion gives it meaningful leverage when negotiating reimbursement rates

3. ROIC punches in at 37.1%, illustrating management’s expertise in identifying profitable investments