Tech stocks have dominated headlines for months, but beneath the surface, a stealth rotation into value stocks is gaining momentum. As high-flying tech names like Microsoft form ominous “death cross” patterns and AI darlings face increasing scrutiny, savvy investors are shifting capital into overlooked companies with solid fundamentals and attractive valuations.
This isn’t just another “buy the dip” opportunity – it’s potentially the start of a major market rotation that could define investment returns for the rest of 2025.
I’ve identified three value stocks showing remarkable technical strength that deserve your immediate attention. These companies aren’t just cheap – they’re displaying the kind of chart patterns and fundamental improvements that typically precede significant upward moves.
Kraft Heinz (KHC): The Consumer Staple Ready to Break Out
Kraft Heinz has languished in the shadows for years following its failed 2019 turnaround. But while investors were looking elsewhere, CEO Miguel Patricio has quietly transformed the company’s balance sheet, reducing debt by over $8 billion since taking the helm.
The stock currently trades at just 11.8x forward earnings – a 48% discount to the S&P 500’s 22.7x multiple – despite growing organic sales for six consecutive quarters. More importantly, Kraft’s 50-day moving average recently crossed above its 200-day line, forming the bullish “golden cross” pattern that technical analysts love.
What makes this opportunity especially compelling is the 4.5% dividend yield – more than triple the S&P 500’s paltry 1.2% payout. With inflation still running above the Fed’s target, this income component provides meaningful protection while you wait for the valuation gap to close.
The company’s most recent earnings revealed something most investors missed: private label competition is actually decreasing for the first time since 2020, with Kraft brands gaining market share in 7 of its 10 largest categories.
Valero Energy (VLO): The Cash Flow Machine Trading at 6x Earnings
Energy stocks have been left behind in the AI mania, but Valero’s chart is sending a clear message that smart money is accumulating shares. The refining giant has formed a textbook cup-and-handle pattern that typically precedes major breakouts, and volume has been steadily increasing on up days – a key sign of institutional buying.
At just 6.2x forward earnings, Valero is priced as if refiners will never make money again. This ignores the company’s record $5.9 billion in free cash flow generated last year, much of which is being returned to shareholders through aggressive buybacks that have reduced the share count by nearly 8% in the past 12 months.
The recent announcement of a 10% dividend increase brings the yield to an attractive 3.7%, and management has signaled they plan to continue prioritizing shareholder returns. With crack spreads (the difference between refined product prices and crude oil costs) remaining well above historical averages, Valero’s earnings power is being significantly underestimated by Wall Street.
Citigroup (C): Banking on a Turnaround
While most bank stocks have rallied sharply from their 2023 lows, Citigroup remains a laggard – trading at just 8.4x earnings and 0.6x book value. But CEO Jane Fraser’s transformation plan is finally gaining traction, with the bank exceeding efficiency targets for three consecutive quarters.
Citigroup’s chart shows a multi-month consolidation pattern that’s coiling tighter, with decreasing volatility and rising accumulation indicators. These technical patterns often resolve to the upside, especially when combined with improving fundamentals and extreme undervaluation.
The most compelling catalyst is Citigroup’s capital return program that’s set to accelerate dramatically. The bank received approval to increase its buyback authorization by $5 billion (roughly 7% of its market cap) and recently hiked its dividend by 8%. With excess capital well above regulatory requirements, there’s room for these returns to increase further.
Citigroup’s investment banking division is also showing signs of life, with fees up 22% year-over-year last quarter as M&A activity finally rebounds from multi-year lows. This high-margin business could drive significant earnings upside that isn’t currently reflected in analyst estimates.
Why This Matters Right Now
The inflection point for value stocks couldn’t come at a better time. With the S&P 500’s valuation stretched to levels not seen since the dot-com bubble (excluding the pandemic anomaly), the market desperately needs new leadership to sustain its uptrend.
Value stocks historically outperform during periods of economic uncertainty and when the Fed begins its rate-cutting cycle – both conditions we’re likely to see in the coming months. More importantly, these stocks provide a margin of safety that’s increasingly valuable as geopolitical tensions rise and economic indicators flash warning signs.
Rather than chasing the same crowded tech trades, positioning in these overlooked value stocks now gives you both defense and offense – protection against market volatility plus substantial upside potential as the inevitable rotation plays out.
For investors worried about preserving capital while maintaining market exposure, these three stocks represent the ideal combination of income, value, and improving technicals that could drive market-beating returns through the rest of 2025.