With the stock market hitting all-time highs nearly three dozen times in 2025, many advisors feel that stocks have grown too pricey and are suggesting that investors trim their stakes, especially in fast-growing tech giants, and look for undervalued stocks now.
This strategy is not exciting or glamourous, says stock maven John P. DeGulis of Sound Shore Management, but there are distinct advantages…
If the current bull market continues to go higher and the economy stabilizes, there’s plenty of opportunity for undervalued stocks to rise.
But if we get a recession and market volatility, these same stocks tend to offer better downside resistance because expectations for them were lower to begin with.
Bottom Line Personal asked DeGulis about his strategies for looking for undervalued stocks and for some of his favorites right now…
Undervalued Stocks
Traditionally, investors search for undervalued stocks by screening for cheap share prices and valuation metrics such as a price-to-earnings ratio (P/E) and price-to-book ratio (P/B) that are low relative to their industries and the stocks’ individual histories. (Note: You can find these stock metrics at Finance.Yahoo.com and Morningstar.com).
But in today’s bull market, the most undervalued stocks may be cheap for good reasons. Example: They could be losing market share to stronger competitors or they are stuck in a dying industry.
Here’s what I look for, beyond just low valuations, to uncover stock market bargains…
Focus on financially sound companies whose share prices have been hurt due to temporary problems
These problems can include a quarterly earnings’ disappointment…an acquisition that is taking a while to digest and pay off…or major changes in the stocks’ industry. The companies should still be profitable and have strong enough free cash flow to buy back their own shares and/or use the money to expand businesses. I want to see businesses that have already begun their turnarounds as evidenced by improved earnings, increased profitability and/or promising new products or services. Three financially sound companies hurt by temporary problems…
Capital One Financial (COF). Wall Street thinks of Capital One as an ordinary consumer bank that does credit card lending and lets you catch a coffee at its bank cafés. But in fact, the bank is far more innovative. Its operations are run 100% in the cloud, a move so cost-efficient that it has allowed a massive marketing budget to drive growth in its high-end credit card division. Also, in 2025, the bank acquired Discover, the third-largest credit card and payment network brand in the US with 50 million cardholders. Capital One will bring more heft, capital and technology to grow Discover internationally so it can compete with Visa and Mastercard. Recent share price: $216.80.*
Incyte Corp. (INCY). The biotech company has been under pressure because of a looming loss of patent protection on its blockbuster cancer drug, Jakafi, which accounts for two-thirds of the company’s annual revenues. But Incyte has strengths that are overlooked—the company is combining Jakafi with other regimens to extend the drug’s patent protection…and its FDA-approved eczema drug, Opzelura, had sales of more than a half-billion dollars last year. In addition, Incyte boasts a rich pipeline in clinical trials for oncology drugs that treat ovarian cancer and non-Hodgkin lymphoma. Recent share price: $105.41.
Walt Disney Co. (DIS) has struggled in recent years because the landscape for the traditional media business was disrupted by the Internet and streaming video. The decline of network and cable TV has hurt Disney’s core properties, including ABC-TV and ESPN. But: The House of Mickey Mouse is poised for a comeback—its Disney+ and Hulu streaming services have turned profitable…and Disney’s iconic characters and movie franchises will keep the firm’s streaming content in high demand. Meanwhile, Disney’s parks, resorts and cruise businesses continue to generate steady free cash flow and have fueled a renewed dividend and a $3 billion annual share-buyback program. Recent share price: $107.61.
Look for strong businesses in industries currently out of favor with investors
Stock prices in such businesses often get punished unfairly because investors overlook their considerable potential. Examples: There are opportunities in the automotive-manufacturing sector, which is slumping due to ongoing supply-chain disruptions, tariffs and slow consumer adoption in the transition to electric vehicles (EVs)…and the pharmaceutical industry, which has been hit hard because of regulatory and policy uncertainty over Medicaid reimbursements and drug pricing. Two strong companies in out-of-favor industries now…
General Motors Co. (GM) has engaged in an impressive turnaround over the last decade. The company has restructured its pension funds, sold its European businesses, cut its product line in half and started manufacturing innovative high-quality vehicles. The automaker dominates the large-truck category with vehicles such as the GM Silverado and Sierra. It also is rebuilding its electric-vehicle business from the ground up. The Chevrolet Equinox EV became the top-selling non-Tesla EV in the US in 2025. Recent share price: $71.89.
Teva Pharmaceutical Industries Ltd. (TEVA) is best known as the world’s leading generic-drug manufacturer, but it also has developed a strong branded pharmaceutical drug franchise, as well as a thriving “biosimilar” business. Biosimilars are generic versions of biologics, medicines derived from living organisms rather than chemicals. Teva’s biosimilars show promising growth as many best-selling biologics will lose their patent protection in the next five years. Teva’s new CEO also has invested heavily in a pipeline of drugs in late-stage clinical trials that focus on therapeutic areas with high unmet need, including inflammation, asthma and schizophrenia. Recent share price: $25.54.
Consider non-tech stocks that are likely to benefit from AI’s second wave
Artificial intelligence has just gotten started as one of the defining investment themes of our lifetime. So far, it has mostly benefitted a narrow range of stocks that now trade at very high valuations such as semiconductor chip companies (e.g., Nvidia) and hyperscalers, companies that build and operate massive, scalable data centers primarily for cloud computing and AI workloads (e.g., Amazon, Microsoft). I expect the AI phenomenon to broaden as it matures and produce some unexpected winners. Two non-tech stocks that will benefit from AI…
Flex Ltd. (FLEX) is an industrial manufacturing company with factories that assemble semiconductor chips and electrical components into electronic products. It is a tough, highly competitive business with low profit margins. But: Flex has evolved into a specialty manufacturer of high-value products for the medical, industrial and automotive industries, all of which are experiencing a vastly increased need for chips and more sophisticated electronic systems. In addition, Flex has strong exposure to high-growth AI niches, including manufacturing equipment for energy infrastructure, data centers and digital health care. Recent share price: $59.53.
GE Healthcare Technologies (GEHC) is a medical-technology firm that has a leading global market share in imaging and ultrasound equipment. Spun off from General Electric in 2023, the company has a firmly established footprint in hospitals and health networks around the world as it profits from aging populations and increased need for minimally invasive procedures. AI could be a game changer for GE HealthCare’s pharmaceutical diagnostics division, which uses contrasting dyes and radiopharmaceuticals in conjunction with medical imaging to detect and diagnose diseases such as cancer, heart conditions and neurological disorders. AI will enhance the speed and accuracy of the diagnostics and enable more precise and personalized patient treatment. Recent share price: $73.97.
Look overseas
Stocks in foreign developed countries are considerably cheaper than those in the S&P 500. Plus, a new global era of elevated inflation and interest rates is a tailwind for “old-economy” sectors such as financial services and industrials, which are more prominent overseas. One undervalued foreign stock…
Nestle (NSRGY). The Swiss food and beverage giant owns a vast portfolio of well-known brands such as Gerber baby food, Häagen-Dazs, KitKat, Perrier and Purina. Growth has slowed in recent years. Tariff concerns have pushed consumers to shop less, while weight-loss drugs have further reduced some Americans’ calorie intake. But: The company is redirecting resources toward its “billion-dollar brands” and high-growth areas, such as coffee, pet care and nutritional health sciences. It also is rolling out innovative new products including Nescafé Espresso Concentrate and Gerber cereals and fruit smoothies that are designed to enhance chewing skills for toddlers. Recent share price: $101.67.
*Stock prices are current as of November 13, 2025, and courtesy of Morningstar, Inc.
