6 Value Stocks That Could Shine Bright in 2025

In recent years, investor focus has been dominated by tech giants such as the Magnificent 7, leaving value stocks to lag behind. For instance, the ETF tracking the S&P 500 large-cap value stocks delivered a return of less than 10% in 2024, significantly underperforming the gains of these tech leaders. However, 2025 might mark a turning point.

The Chief Investment Officer of Oakmark Fund has identified undervalued stocks with promising potential and shared their insights with clients. Below are some notable picks:

1. Airbnb: Positioned for Long-Term Growth

The online marketplace platform Airbnb has faced stock price pressures due to concerns over the economy and short-term tourism trends. However, Oakmark's team believes that global tourism remains an attractive market, with alternative accommodations gaining market share, offering Airbnb ample room for long-term growth. They also see Airbnb's ability to deliver "valuable services to both sides of the marketplace" as a key driver for sustained expansion.

2. The Carlyle Group: A Discounted Gem in Alternative Investments

The alternative investment manager Carlyle Group currently trades at less than half the average price-to-earnings ratio of its peers. Oakmark notes that the company's management is "taking the right steps to expand its platform beyond its private equity foundation," which could bolster organic growth. Carlyle's strong brand and distribution capabilities also give it a competitive edge in retail channels, where allocations to alternative investments are expected to rise.

3. Elevance Health: Temporary Challenges, Long-Term Potential

Managed care stocks like Elevance Health have struggled recently due to mismatches between reimbursement rates and rising medical costs. However, Oakmark views these challenges as "temporary," anticipating that pricing adjustments and changes in plan designs will realign profitability over time. While returning to normalized earnings might take a few years, they emphasize that the stock's current valuation reflects these temporary headwinds, presenting an attractive opportunity.

4. GE HealthCare Technologies: Positioned for AI and Precision Medicine

GE HealthCare Technologies stands to benefit from AI-enabled software and the broader shift toward precision medicine. The market has underestimated the internal improvement potential of this global healthcare technology leader, compounded by concerns over weakened demand from China, which has pressured its valuation. As the company improves internal operations and adopts advanced technologies like AI, it is well-positioned to achieve both performance growth and valuation expansion, creating the potential for a Davis double play.

5. Keurig Dr Pepper: Brewing Growth Opportunities

Keurig Dr Pepper's stock suffered last year due to weakness in its coffee segment. However, Oakmark remains optimistic, arguing that coffee's enduring popularity limits the impact. The company boasts the largest installed base of single-serve coffee machines and has significant room to increase household penetration, a factor they believe the market has "barely factored into its valuation."

6. Centene: Poised to Thrive Amid Regulatory Challenges

Centene, a managed care healthcare company, has faced valuation pressure due to perceived risks of regulatory changes under the incoming Trump administration. However, these concerns are seen as exaggerated. Centene boasts significant intrinsic profitability, capable of driving consistent earnings-per-share growth even in a less favorable regulatory environment.