Megacap stocks are behemoths that set the tone for their industries, and their massive scale typically leads to wide moats. However, the downside is that most have already exploited their existing market opportunities and must invest heavily to expand further, a risky proposition.
These trade-offs can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you find high-quality companies that can grow their earnings no matter what. That said, here are three industry titans whose existing offerings may be tapped out and some other investments you should look into instead.
PepsiCo (PEP)
Market Cap: $222.6 billion
With a history that goes back more than a century, PepsiCo (NASDAQ: PEP) is a household name in food and beverages today and best known for its flagship soda.
Why Are We Cautious About PEP?
- Falling unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Anticipated sales growth of 4.7% for the next year implies demand will be shaky
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 1.8 percentage points
PepsiCo is trading at $162.84 per share, or 18.1x forward P/E. Check out our free in-depth research report to learn more about why PEP doesn’t pass our bar.
Caterpillar (CAT)
Market Cap: $328.9 billion
With its iconic yellow machinery working on construction sites, Caterpillar (NYSE: CAT) manufactures construction equipment like bulldozers, excavators, and parts and maintenance services.
Why Are We Wary of CAT?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Earnings per share have dipped by 5.2% annually over the past two years, which is concerning because stock prices follow EPS over the long term
At $703.15 per share, Caterpillar trades at 30.6x forward P/E. If you’re considering CAT for your portfolio, see our FREE research report to learn more.
Citigroup (C)
Market Cap: $205.7 billion
With operations in nearly 160 countries and a history dating back to 1812, Citigroup (NYSE: C) is a global financial services company that provides banking, investment, wealth management, and payment solutions to consumers, corporations, and governments.
Why Does C Worry Us?
- Scale is a double-edged sword because it limits the firm’s growth potential compared to its smaller competitors, as reflected in its below-average annual net interest income increases of 6% for the last five years
- Net interest margin of 2.4% reflects its high servicing and capital costs
- Sizable asset base leads to capital growth challenges as its 6.1% annual tangible book value per share increases over the last two years fell short of other banking companies
Citigroup’s stock price of $117.63 implies a valuation ratio of 1x forward P/B. Dive into our free research report to see why there are better opportunities than C.
Stocks We Like More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 9 Market-Beating Stocks. 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.
