These 3 Undervalued Stocks Could Surge as Value Rotation Nears

One of the most reliable gauges of sentiment in the stock market is where growth stocks trade relative to value stocks, since any given extreme can signal above-average optimism or pessimism, creating opportunities for investors to ride a return to balance. Toda’s market appears to be driven by extreme optimism, prompting investors to delve deeper into identifying value and potential upside.

By charting the iShares S&P 500 Value ETF (NYSEARCA: IVE) against the iShares S&P 500 Growth ETF (NYSEARCA: IVW), investors can clearly see that value stocks have fallen behind by a wide margin, in fact, the widest margin over the past decade. Chances are that a big “catch-up” play may happen soon, triggering a rotation back into these forgotten high-quality businesses.

Some of these stocks may include Johnson & Johnson (NYSE: JNJ), Berkshire Hathaway Inc. (NYSE: BRK.B), and even Intel Corp. (NASDAQ: INTC). With a blend of the technology sector and other stable areas of the United States economy, this list could provide investors with a basket of reasonable upside and very limited downside risk due to today’s discounts.

Smart Money Buyers Land on Johnson & Johnson Stock

Even though Johnson & Johnson stock is nearing its 52-week high, other measures of valuation are falling behind in the broader value stock theme. The company’s forward price-to-earnings (P/E) ratio of 14.9x today falls short of the historical average of just about 19.5x, creating a wide enough gap to be filled by a healthy rally.

This simple measure of discounts present in a $377.5 billion giant in the medical space may have triggered some value hunters in the market, such as those from Assenagon Asset Management, who boosted their holdings in Johnson & Johnson stock by as much as 160% as of early July 2025.

After this new allocation, the group now holds up to $635.3 million worth of the stock, giving investors another bullish pillar to lean on in their own views. With this in mind, chances are rapidly increasing that Johnson & Johnson stock may see higher prices sooner rather than later, and that is something Wall Street analysts agree with.

Such as Shagun Singh, an analyst from the Royal Bank of Canada, who reiterated an Outperform rating on Johnson & Johnson stock alongside a price target of $181 per share. This valuation directly calls for a net upside potential of as much as 16%, which is not a common achievement for a company of this size.

Berkshire Hathaway’s Discount Won’t Last Long

One of the certainties in the stock market's history is that value investor Warren Buffett is likely to outperform the broader S&P 500 index. The best way for investors to learn from him and improve their returns is by investing in a basket of high-quality value stocks.

This basket is called Berkshire Hathaway, and it is part of the outperformance now seen across value stocks as well. Over the past quarter alone, Berkshire Hathaway has fallen behind by as much as 26% compared to the S&P 500 index, a massive discount gap that investors will regret not taking advantage of in the coming months.

As valuations go, Berkshire Hathaway’s 1.6x price-to-book (P/B) ratio falls greatly behind the financial sector’s average of 2.3x. This provides investors with another benchmark to which the stock falls below and yet another gap to be filled in terms of upside.

Speaking of the upside, Kein Heal, an Argus analyst, has a recent rating on Berkshire Hathaway that indicates a valuation of up to $575 per share, which hasn’t been updated since March 2025 to reflect high confidence in a potential rise of as much as 21% from today’s prices.

A Special Tailwind for Intel Stock

Assenagon wasn’t only buying Johnson & Johnson this time around; they also justified an 86.4% boost to their Intel stock positions, bringing their entire stake to a high of $508.6 million today. Intel stock is appealing not just because it trades at only 63% of its 52-week high, but also due to a current industry catalyst.

As the United States deepens its agenda of reshoring semiconductor and chipmaking supply chains, Intel’s presence within the country could further attract investor interest and raise demand and price.

Considering this is a high-profile government theme in the world of artificial intelligence development, investors can gauge the recent buying activity of United States Congress members for Intel stock as a positive sign. Marjorie Taylor Greene, Ro Khanna, and Jefferson Shreve (among others) have been some government officials who bought Intel stock recently.

After all, Intel is one of the names better positioned to respond to a call for onshoring the semiconductor supply chain, and also one of the cheapest ones to enjoy a ride back to value stocks on top of this broader industry catalyst.

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Tilray Shares Blazing: What's Behind the 55% Rally This Month?

Tilray Brands Inc. (NASDAQ: TLRY), once a leading light in the legal cannabis industry with shares trading as high as nearly $150, has seen its stock price almost entirely collapse in recent years. A multitude of factors may be to blame—the lack of federal legalization of recreational cannabis, regulatory inconsistencies, problems matching supply and demand, and more have all devastated the industry.

Nonetheless, Tilray shares have behaved remarkably around the midpoint of 2025, rising by some 55% in a one-month span. Could it be that projected cash flow and profitability, the possibility of more favorable regulatory environments, and an expanded geographical and product focus could inspire a long-term turnaround for a company that is down more than 99% from its all-time share price high?

To be sure, Tilray remains a highly risky bet, but investors with the tolerance to approach a volatile industry might find reasons to consider it.

Positive Cash Flow Signal, But Financial Troubles Remain

Tilray has long faced a profitability hurdle, and while the company has yet to achieve consistent positive cash flow, some analysts believe it could accomplish this goal in the coming quarters. The company has boosted its margins—the most recent quarter saw the highest cannabis gross margins in about two years, rising to 41% from 33% a year earlier. Additionally, the company achieved an overall gross margin of 28% compared with 26% for the prior-year quarter.

Tilray has also been focused on reducing debt and has been largely successful in these efforts. As of the third-quarter fiscal 2025 earnings release, the company's debt level was under 1x its trailing 12-month EBITDA.

Further, the firm's beverage arm is making progress on Project 420, an initiative to reduce costs and improve efficiency and profitability that is expected to be completed in the next year.

All of these factors may have contributed to Tilray's recent rally, although investors should keep in mind that the firm still faces financial uncertainty. The latest earnings report revised the company's fiscal 2025 revenue estimates down to a range of $850 million to $900 million from a prior range of $950 million to $1 billion. Despite recent successes, Tilray also still underperformed analyst predictions in the latest earnings round.

Regulatory Questions Linger, But is There Some Reason for Optimism?

Another driver of TLRY's recent price increase could be optimism about the regulatory environment under the second Trump administration. Advocates have anticipated that the U.S. Drug Enforcement Administration (DEA) might reclassify cannabis to Schedule III from Schedule I of the Controlled Substances Act, a move that would maintain the status of the drug as illegal on a federal level while allowing for more robust medical research.

Unfortunately for supporters of this change, though, the DEA has continued to postpone these efforts for several months. However, the rescheduling process may be restarted if Terrance Cole is confirmed as the next DEA Administrator following a five-month period since his nomination to the position by President Trump.

Expanded Focus May Broaden Revenue Streams

Tilray has broadened its product lineup considerably in recent quarters. Most recently, the company added a new line of summer cannabis products through subsidiaries, affirming the central role cannabis continues to play in its operations.

It has been about two years since Tilray acquired a significant beverage portfolio from Anheuser-Busch. The company has continued to bulk up its holdings in that area as it has become one of the largest craft brewers in the U.S. The company's beverage revenues continue to climb.

On the cannabis front, the firm recently gained critical authorization from the Italian Ministry of Health to import and distribute its own proprietary medical cannabis flowers for therapeutic purposes. Alongside the company's endeavors throughout Europe, this latest development could help to cement Tilray's position in a burgeoning and largely unaddressed market.

Caution Still Wins the Day

Despite these positive developments, investors should exercise caution before making a Tilray investment. The company's share count has repeatedly increased in recent years, and the recent rally threatens its value prospects.

Ultimately, though, the biggest risk with a TLRY investment might simply be that the legal cannabis industry overall has yet to establish itself in the United States, and even well-known companies like Tilray currently lack stability.

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3 Retail Stocks to Watch as Back-to-School Spending Ramps Up

We’re past the Fourth of July, which marks the official second half of the year. For retailers, this also means the beginning of the back-to-school shopping season. This is the second biggest retail season after the holiday season.

According to estimates from the National Retail Federation, in 2024, U.S. consumers spent $38.8 billion on back-to-school supplies, an average of $874.68 per household.

That number was down from the record high of $41.5 billion spent in 2023. But this year, 71% of parents expect to spend more, with estimates that households will spend an average of $1,230 to get their kids back to school ready.

For investors, this is a good time to look at companies that could be ready to deliver strong numbers. Many retailers don’t report earnings until the end of August or early September. That will give investors their first look at spending trends. However, it’s never too early to forecast the likely winners and here are 3 compelling stocks to consider.

Walmart Is an Established Leader With Room to Grow

Walmart Inc. (NYSE: WMT) stock has delivered a total return of more than 39% in the last year and over 144% in the last five years. Through a global pandemic, generational high inflation, followed by generational high interest rates, the retailer has continued to show why it’s a great investment.

However, even Walmart hasn’t been immune to changes in consumer discretionary spending. The company is noticing that the low- to middle-income consumer is holding back on discretionary purchases. But back-to-school spending isn’t discretionary, and Walmart will be a place that those shoppers go for the lowest prices.

Among retail stocks, it’s hard to find areas of concern with Walmart. However, it’s fair to note that investors are paying a premium for the stock. That’s been true for some time. But the company’s full-year earnings per share (EPS) guidance for 2026 was between $2.50 to $2.60. Even at the high end, that’s not much of a boost from the prior year.

Still, the Walmart analyst forecasts on MarketBeat give WMT stock a consensus price target of $106.67, which would be an 11% gain from its July 10 levels. Investors are also nearly certain to receive a dividend increase, which would make it 54 consecutive years of increases for this dividend king.

DICK’S Stock Has Their Omnichannel Game on Point

Back-to-school shopping is about more than pens and paper. It’s also about cleats and other equipment that student athletes need. That’s where DICK’S Sporting Goods Inc. (NYSE: DKS) comes in. The company is a go-to retailer for sporting equipment. In fact, the company just concluded its DICK’S Deal Days summer sporting event.

Over the last five years, DICK’S has accelerated its online presence. This was one reason the stock spiked in 2020 and enjoyed another strong year in 2024.

At around $212 per share, DKS stock is trading near the analyst consensus price of around $219. However, since the company’s last earnings report in May, several analysts have issued price targets over consensus, with the highest coming from Bank of America (NYSE: BAC) at $240. Plus, the stock is trading in the middle of its 52-week range, which leaves even more room to the upside.

Another reason for investors to eye DKS stock as a back-to-school winner is its recent acquisition of Foot Locker. That’s expected to close in the second half of 2025 so it won’t impact the current results but is likely to provide an upside boost to future guidance.

Target Is a Contrarian Pick That Offers Strong Value

Target Corp. (NYSE: TGT) isn’t just one of the worst-performing retail stocks in 2025; it’s held that crown for several years. In fact, despite being a dividend king with 54 consecutive years of dividend increases, Target has generated a negative total return of around 1.4% for investors over the last five years.

However, there are some glimmers of hope that may serve as a catalyst for an objectively undervalued stock. First, the United States has reached a tariff agreement with Vietnam. The new 20% tariff on imports from Vietnam is double the prior 10% level, but significantly better than the 46% level the administration proposed on Liberation Day.

That should help Target provide more specific guidance. The company said in its prior earnings call that it expects to offset much of the new tariff costs through diversified sourcing, vendor negotiations, and assortment adjustments rather than price increases.

Plus, analysts expect a change in the C-suite with current chief executive officer (CEO) Brian Cornell’s contract ending in September. Cornell agreed to a 3-year extension in 2022 but is now past Target’s traditional retirement age. However, investors may see that as a welcome change, particularly if the next executive comes from outside the company.

TGT stock may fall further. However, it is also undervalued at 11x earnings and a 0.44 price-to-sales (P/S) ratio. Both statements can be true, but investors should look at the scenario that offers the best upside. A little boost in revenue and earnings would do a lot to boost the TGT share price.

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