The new year has arrived with renewed volatility, following a hawkish rate cut by the Fed to close out 2024. This follows an eventful election where Donald Trump’s win added another layer of uncertainty, with policies that could complicate the Fed's ongoing battle with stubborn inflation.
But that's not all - the broader concern now centers on high valuations after the S&P 500 posted back-to-back years of 20%+ gains.
Yet, despite these concerns, timing the market remains a fool’s errand, particularly when there are still plenty of undervalued opportunities to seize. In fact, a little market volatility can actually work in favor of savvy traders able to spot these high-value plays.
This is where InvestingPro's Fair Value tool comes into play, helping investors pinpoint hidden gems in a choppy market.
Whether you're looking to buy, hold, or sell, this tool helps you cut through the noise and make informed decisions by presenting a fundamentally-backed calculation of the true value of every stock in the market relative to its earnings.
The most undervalued and overvalued stocks in the market are then sorted in the lists below, updated live as prices move (only accessible to InvestingPro members).
Now here's the real kicker: during the New Year sale, you can get it all for up to 50% off by clicking on this link.
But don't just take our word for it. Check out this list of undervalued stocks that the Fair Value tool flagged at just the right time, which then soared in value.
1. Bank of America (NYSE:BAC)
- Previous Fair Value (FV) Date: 18/03/2023
- Current Date: 05/01/2025
- FV Upside Signaled (Previous Date): 63.16%
- Actual Return Delivered: 61.07%
2. Walt Disney Company (NYSE:DIS)
- Previous Fair Value (FV) Date: 27/09/2023
- Current Date: 05/01/2025
- FV Upside Signaled (Previous Date): 41.21%
- Actual Return Delivered: 39.12%
3. Citigroup (NYSE:C)
- Previous Fair Value (FV) Date: 02/01/2023
- FV Upside Signaled (Previous Date): 50.15%
- Current Date: 05/01/2025
- Actual Return Delivered: 56.98%
4. Rtx (NYSE:RTX)
- Previous Fair Value (FV) Date: 15/09/2023
- FV Upside Signaled (Previous Date): 50.04%
- Current Date: 05/01/2025
- Actual Return Delivered: 52.77%
5. 3M Company (NYSE:MMM)
- Previous Fair Value (FV) Date: 04/10/2023
- FV Upside Signaled (Previous Date): 47.26%
- Current Date: 05/01/2025
- Actual Return Delivered: 47.55%
6. Qualcomm (NASDAQ:QCOM)
- Previous Fair Value (FV) Date: 03/01/2023
- FV Upside Signaled (Previous Date): 54.20%
- Current Date: 05/01/2025
- Actual Return Delivered: 47.23%
7. Cencora (NYSE:COR)
- Previous Fair Value (FV) Date: 08/02/2023
- FV Upside Signaled (Previous Date): 39.68%
- Current Date: 05/01/2025
- Actual Return Delivered: 45.20%
8. Ferrovial (NASDAQ:FER)
- Previous Fair Value (FV) Date: 31/07/2023
- FV Upside Signaled (Previous Date): 34.57%
- Current Date: 05/01/2025
- Actual Return Delivered: 37.15%
9. Analog Devices (NASDAQ:ADI)
- Previous Fair Value (FV) Date: 31/10/2023
- FV Upside Signaled (Previous Date): 32.66%
- Current Date: 05/01/2025
- Actual Return Delivered: 36.87%
10. Nextera Energy (NYSE:NEE)
- Previous Fair Value (FV) Date: 03/10/2023
- FV Upside Signaled (Previous Date): 33.98%
- Current Date: 05/01/2025
- Actual Return Delivered: 36.40%
Now, let’s take a deeper dive into the top two giants in this category, Bank of America and Walt Disney, to understand how these winners’ stories unfolded:
#1. Bank of America – After Calling a 63% Upside Correctly, Fair Value Still Signals Undervaluation
Bank of America made headlines in September 2024 when Warren Buffett trimmed his stake in the company—a process that began in mid-July. For the legendary investor, this move was strategic.
After all, Buffett had invested $5 billion into the bank during its time of need in 2011, just a few years after the financial crisis. Today, he still owns 11.9% of the bank, making it the third-largest holding in his portfolio, with a total value of $31.6 billion, according to InvestingPro.
Interestingly, Buffett’s decision to trim shares came as Bank of America stock entered a solid uptrend, rebounding strongly from its early 2023 lows.
Despite pressures from the Fed's aggressive rate hike cycle, which squeezed margins for many banks, Bank of America has remained consistently profitable—a testament to its resilience and operational strength.
But Buffett wasn’t the only one to see value amid the noise. InvestingPro’s Fair Value tool flagged Bank of America as a bargain, with potential 63.16% upside in the offing after its steep decline, which saw the stock lose nearly half its value following its peak of just under $50 in early 2022.
The tool’s well-timed signal coincided with a turning point for the stock, which surged 61.07% over the next 22 months, reaching $45 by January 5, 2025.
For investors who followed the Fair Value tool’s insights, Bank of America’s impressive rally underscores the power of data-driven decision-making.
Now, the real question is, has Bank of America reached its full upside potential yet?
The Fair Value tool suggests otherwise. Despite the impressive 61.07% rally, the tool signals that the stock still has room to grow, with an estimated 29.9% upside yet to be realized.
Source: InvestingPro
#2. Walt Disney – How Fair Value Tool Detected Strong Fundamentals in this Undervalued Gem
Walt Disney faced a brutal 2023, with its stock trading below its previous year's dip and hovering near pandemic lows. By September, it was inching closer to a 10-year low—levels last seen in 2014.
The stock seemed trapped in a relentless downward spiral, on track to deliver its 21st down month in the past 30. With this kind of performance, investor confidence was understandably scarce, and there were few signs of a bullish reversal in sight.
However, Disney's quarterly earnings report provided a surprising twist. Despite posting a loss and breaking a three-year streak of profitable quarters, revenue hit all-time highs.
This resilience stood out, especially with the stock teetering near decade-low levels. As fundamentals remained solid, few anticipated a turnaround, but the numbers suggested it was overdue.
Enter the Fair Value tool. Leveraging well-established industry metrics, it indicated that Disney’s stock reversal was imminent and forecasted an upside of around 40%.
Fast-forward to September 27, 2023, and the stock began to rally. By January 5, 2025, Disney had exceeded the initial upside potential, posting a remarkable 41.21% total gain. While the stock experienced a dip along the way, it was quickly bought up, pushing the stock higher once more.
The Fair Value tool's signal proved to be right on target—proving that even the most battered stocks can turn around when the fundamentals are strong.
Conclusion
The stories above underscore a key point in the journey toward long-term, sustained wealth generation: making informed, data-driven decisions based on a stock’s true worth will often prove the difference between chasing the market and bagging real long-term gains.
By focusing on factors like analyst targets, historical performance, and valuation models, you can gain a clearer perspective on market opportunities.
Whether identifying undervalued companies overlooked by the crowd or avoiding stocks inflated by hype, taking a thoughtful, data-driven approach positions you to uncover real potential for long-term success.
Subscribe to InvestingPro for up to 50% off and see all undervalued stocks in the market.
Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.