5 Most Undervalued Stocks to Buy in 2025

No list of value stocks would be complete without famed investor Warren Buffett's Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B).

Because it is a holding company, buying shares of Berkshire Hathaway gives you exposure to a private portfolio of insurance businesses (GEICO, among others), one of the largest railroads in the U.S. (BNSF Railway), an energy and utility conglomerate (including a huge renewable energy division), and various other enterprises that span industries from candy to apparel.

When it comes to public companies, Berkshire also holds significant stakes in Apple (NASDAQ:AAPL), Bank of America (NYSE:BAC), American Express (NYSE:AXP), Chevron (NYSE:CVX), and Coca-Cola (NYSE:KO).

Shares of mega-retailer Target (NYSE:TGT) have lagged competitors like Costco (NASDAQ:COST) and Walmart (NYSE:WMT) in recent years.

Contributors to this underperformance included sluggish growth hampered by higher expenses, lower consumer confidence, and general weakness in the consumer discretionary sector. The company has also faced challenges with theft.

Still, Target retains some excellent fundamentals. It's still solidly profitable and has a differentiated position in the massive retail industry. With a forward price-to-earnings (P/E) ratio of 12.3, investors buying Target right now can get a 3.8% dividend yield. The company is also a Dividend King, having increased dividends for more than 50 consecutive years.

Micron (NASDAQ:MU) is a maker of memory chips, and an integrated device manufacturer (IDM), meaning that it both designs and manufactures its chips.

Memory chips are notoriously cyclical as demand and prices can fluctuate wildly due to inventory gluts or changes in end-user demand. Nonetheless, Micron has historically been a winner on the stock market even as the stock has gone through multiple cycles.

These days, Micron's sales are booming thanks to AI. Its biggest customer is Nvidia (NASDAQ:NVDA), and analysts expect sales to jump 39% in fiscal 2025 and 28% the following year. Due to the leverage inherent in its business, that means profits are set to soar. Even with those expectations, the stock trades at a forward P/E ratio of just 12.4. If the company can meet or exceed those expectations, the stock looks significantly undervalued at that valuation.

British American Tobacco (NYSE:BTI) took a significant hit in late 2023 due to a $31.5 billion charge.

This was essentially the company writing off the value many of its cigarette brands as worth much less than it had earlier estimated, given the industry's shift toward smokeless products.

Although the impairment affected BTI's earnings, future revenue, profit growth, and stock price, it was a non-cash-adjusting impairment.

Today, the company remains a free cash flow powerhouse, with trailing-12-month free cash flow of $10.2 billion. This robust cash flow supports a substantial dividend yield of 7.6%, with a very sustainable payout ratio of 66%.

Currently, the stock is trading at a forward P/E ratio of 8.8, which looks like a good price to pay for a strongly profitable company like British American Tobacco, even if it's growth is roughly flat. Like most tobacco manufacturers, its operating margins are strong at 46%, thanks to its pricing power.

Homebuilder stocks like Lennar (NYSE:LEN), which is one of the biggest homebuilders in the country, have historically been undervalued. Following the housing collapse during the Great Recession of 2007-09, the industry was largely viewed as too risky by a number of investors.

Homebuilders have also been reluctant to ramp up activity, but ones like Lennar have cleaned up their balance sheets and are generating steady profits. Meanwhile, a housing shortage in the U.S. has become exacerbated, and according to some estimates, there's a deficit of around 4 million homes. Lennar should also benefit from the eventual easing of interest rates and the recovery of the housing market.

Currently, the stock looks well-priced at a P/E ratio of just 8.3, which is a good value for a sector leader that's poised to benefit from industry-level and macro tailwinds.

Despite a bull market in 2023 and 2024, value investors hunting for a good bargain can still find some undervalued companies on sale.

An undervalued company is one that is consistently profitable and has attractive long-term growth prospects. Its share price is also cheap compared to many of its peers and cheap compared to the amount of future profit expected to be generated. Such stocks can be great options for patient buy-and-hold investors willing to wait for hidden bargains.

Although investors are always on alert for a good deal, it's important to remember that some stocks are cheap for a reason. It may be that a company's growth prospects have diminished, it's losing money, or it's losing business to new competitors.

Whatever the reason, stocks like these (sometimes called "value traps") are not considered undervalued even if they trade at very low prices.

2. Target

3. Micron Technology

4. British American Tobacco

5. Lennar

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