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Where to find value in the market: Analysts

The market is near record highs, but there are still opportunities to find value, two analysts said Tuesday.

The Dow Jones industrial average closed at a record for the second day in a row Tuesday, while the S&P 500 hit a new intraday record but failed to close higher. The Nasdaq came within 10 points of its closing high but also fell into negative territory for the close.

Those hunting for value in the financial sector should look at Citigroup, a "very misunderstood investment story," said Charles DyReyes, senior research analyst at Brandywine Global.

The stock is trading well below tangible book value, which is extremely rare in the financial space right now, and is trading at 10 times earnings, he added.

He thinks Citi's earnings are depressed because of the company's legacy costs and holdings.

"We think in a more normal environment, with lending growth picking up and with higher interest rates, Citigroup's earnings could approach $7 per share. You could see Citigroup trading well over $70," DyReyes said in an interview with CNBC's "Closing Bell."

Traders on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders on the floor of the New York Stock Exchange.

Meanwhile, investors who have been burned by Citi in the past refuse to own the stock now, he said.

"We think we have negative pessimism in a very cheap stock and improving fundamentals in our favor," said DyReyes.

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He also likes Micron Technology, which is trading at nine times earnings. He believes earnings can go from $3 per share to approaching $5 a share in a few years. At that point, he expects the stock to be worth about $50.

"This is not your grandfather's Micron that other investors have got burned in in past cycles," DyReyes said. "It's a much more balanced and stable and concentrated industry where the earnings power is much higher and profitability is greatly improved from where it was in the past."

Ike Boruchow, senior research analyst at Sterne Agee, likes Signet Jewelers and HanesBrands.

Signet bought Zale and now owns 16 percent to 17 percent market share in the U.S. specialty jewelry category, he noted.

"There is no real player underneath them now. It's highly fragmented," Boruchow told "Closing Bell."

He believes the jeweler can earn $6.50 earnings per share this year and $10.50 to $11 earnings per share by 2017.

Meanwhile, Hanes is unlocking "billions of dollars" in value for shareholders through mergers and acquisitions, he said.

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The company has acquired four businesses over the last two years, and he believes it can continue that trend.

"They can roll them through their global supply chain, take out costs, take operating margins higher," he said. "The earnings power of that business is very large."

—CNBC's Evelyn Cheng contributed to this report.

Disclosures: DyReyes does not own Citigroup or Micron, his family does not own either stock, but the firm owns both stocks. CRT Capital Group makes a market in the securities of Hanesbrands. CRT Capital Group makes a market in the securities of Signet Jewelers. CRT Capital Group expects to receive or intends to seek compensation for investment banking services from SIG, HBI.