As the stock market approaches fresh record highs, investors are on a hunt for stocks that won't cost them much, but will have plenty of upside in the future.
This week, the S&P 500 and Dow Jones Industrial Average traded at their highest levels of 2016, boosted by positive earnings reports. On the horizon, traders are looking to constructive remarks by Federal Reserve officials, which may yet lift stocks to all-time highs.
With markets at lofty levels, where can investors find opportunity? Sarat Sethi of Douglas C. Lane & Associates told CNBC he looks for undervalued companies poised to pop.
When hunting for value, Sethi has a formula. "Stock picks should have solid balance sheets, bigger than market dividend, lower multiples, strong management teams, the ability to keep cutting costs, and growing top line," he suggested.
Along those lines, Sethi made a case for three names: General Motors, Qualcomm, and Macy's.
Despite trading down 4 percent year-to-date, Sethi is a believer in General Motors. "GM is not getting credit for new products and management," he argued.
On Thursday, the auto maker posted strong first quarter earnings, well above Wall Street forecasts. The surge in sales came from higher profit margin SUV and crossover vehicles.
General Motors pays a 5 percent dividend yield.
So far this year, shares of Qualcomm are up 3 percent and according to Sethi, there's more room to run. He likes the company's management team. "They are focused on increasing margins and cutting costs."
Currently, the chipmaker trades at 16 times forward estimates.
Lastly, Sethi recommends adding Macy's to your shopping list.
Similar to Qualcomm, he is bullish on the company's decision making. "Macy's management team is focused on rightsizing the company and getting rid of under performing malls."
The retailer has rallied almost 20 percent in 2016, but Sethi believes the stock is a steal at current levels.
Bottom line: Investors should look for solid balance sheets, big dividends, and strong management. Those are fundamental keys to finding value stocks in the market.
Disclosure: Douglas C. Lane & Associates Inc. and Sarat Sethi are long GM, QCOM, and M.
—By CNBC Producer Bree Kelly. Follow her on Twitter @Bree_Kelly