Mid-cap stocks have the best odds of scaling into $100 billion corporations thanks to their tested business models and large addressable markets. But the many opportunities in front of them attract significant competition, spanning from industry behemoths with seemingly infinite resources to small, nimble players with chips on their shoulders.

These dynamics can rattle even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. That said, here are three mid-cap stocks to avoid and some other investments you should consider instead.

Brown-Forman (BF.B)

Market Cap: $13.08 billion

Best known for its Jack Daniel’s whiskey, Brown-Forman (NYSE: BF.B) is an alcoholic beverage company with a broad portfolio of brands in wines and spirits.

Why Is BF.B Not Exciting?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Projected sales decline of 3.6% for the next 12 months points to an even tougher demand environment ahead
3. Efficiency has decreased over the last year as its operating margin fell by 6 percentage points

At $27.62 per share, Brown-Forman trades at 17x forward P/E. Read our free research report to see why you should think twice about including BF.B in your portfolio.

General Mills (GIS)

Market Cap: $25.05 billion

Best known for its portfolio of powerhouse breakfast cereal brands, General Mills (NYSE: GIS) is a packaged foods company that has also made a mark in cereals, baking products, and snacks.

Why Are We Cautious About GIS?

1. Shrinking unit sales over the past two years imply it may need to invest in product improvements to get back on track
2. Forecasted revenue decline of 3.2% for the upcoming 12 months implies demand will fall off a cliff
3. Capital intensity has ramped up over the last year as its free cash flow margin decreased by 3.1 percentage points

General Mills’s stock price of $47.10 implies a valuation ratio of 12.9x forward P/E. To fully understand why you should be careful with GIS, check out our full research report (it’s free for active Edge members).

Kellanova (K)

Market Cap: $28.99 billion

With Corn Flakes as its first and most iconic product, Kellanova (NYSE: K) is a packaged foods company that is dominant in the cereal and snack categories.

Why Does K Fall Short?

1. Flat unit sales over the past two years suggest it might have to lower prices to stimulate growth
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.4%
3. Earnings per share fell by 3.5% annually over the last three years while its revenue was flat, partly because it diluted shareholders

Kellanova is trading at $83.33 per share, or 22.5x forward P/E. If you’re considering K for your portfolio, see our FREE research report to learn more.

High-Quality Stocks for All Market Conditions

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