Invest like Warren Buffett in these undervalued ASX 200 shares

Undervalued ASX 200 shares like Fortescue Metals Group Limited (ASX: FMG) could be ripe for the picking for a Warren Buffett-type investor.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An astute investor like Warren Buffett would be licking his lips as ASX 200 shares enter a bear market. The S&P/ASX 200 Index (ASX: XJO) has fallen 17.74% lower since the start of the year and that has spooked some investors. However, those who have seen this before know that a market crash can be the best time to buy.

Think of ASX 200 shares as products in a store. If all of your favourite items were suddenly put on sale, you might go to the store and stock up for a bargain. That's how long-time investors like Warren Buffett would be seeing ASX 200 shares right now.

But how do you know when something is undervalued and which shares to buy today?

How to invest in ASX 200 shares like Warren Buffett

There are a number of ASX 200 shares that have crashed lower in March. Concerns over the COVID-19 pandemic have spooked investors into selling. But I am a big believer in Buffett's well known investing maxim, "be greedy when others are fearful and fearful when others are greedy." While other investors are panic selling right now, you could use some hard-earned cash to buy good quality shares on the cheap.

However, you have to be careful about which shares you pick. For instance, the ASX 200 travel shares like Webjet Limited (ASX: WEB) have plummeted drastically, but may not be undervalued. The impact of COVID-19 on travel bookings (and therefore earnings) is very tangible. I'd say the same for the major airlines and other ancillary businesses.

However, an ASX 200 share like Fortescue Metals Group Limited (ASX: FMG) may be in the buy zone. Fortescue shares are trading at a price-to-earnings (P/E) ratio of 3.73 times with a dividend yield above 10%. Those are some numbers that could scream buy to an investor like Warren Buffett. While COVID-19 has hit Chinese demand for Aussie minerals, that could bounce back quite quickly as the nation emerges from the outbreak.

It could be a similar story for a company like Ramsay Health Care Limited (ASX: RHC). The COVID-19 outbreak is likely to stretch Ramsay's medical resources to their limits, but could also be a positive for the group's earnings. Shares in the ASX 200 healthcare group were down 16.21% last week and another 6.8% in early trade, which could put them in a buy zone.

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Value Investing

A couple consider the pros and cons of taking out a loan
Value Investing

3 ASX stocks boasting better margins than Nvidia

Think you can't find Nvidia-like margins among Aussie shares... think again.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Value Investing

Looking for ASX value shares? Here's 1 I'd buy and 1 I'd avoid!

It's not an easy exercise to identify which stocks are undervalued and which ones are simply terrible. Here's an example…

Read more »

a man with a wide, eager smile on his face holds up three fingers.
Value Investing

3 Australian value stocks to buy right now

I think these stocks are capable of beating the market.

Read more »

An ASX investor relaxes on her couch as the Harvey Norman share price drops due to the shares trading ex-dividend from today.
Opinions

Cheap and growing: The best bang for buck ASX shares I'd buy

Three companies that I believe are outstanding quality despite being thrown in the discount bucket.

Read more »

Value spelt out in orange on wooden blocks on top of each other.
Dividend Investing

7% and 6% dividend yields! 2 ASX value shares on my buy list

A number of quality ASX value stocks have faced recent headwinds as cost of living pressures begin to bite.

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Value Investing

2 ASX All Ords shares to buy delivering 'exceptional cash flows': fund manager

These stocks could be solid picks and pay big income too.

Read more »

Two happy shoppers finding bargains amongst clothes on a store rack
Value Investing

2 ASX 200 value stocks I'd have loved to buy in the August mini-crash

Here are two ASX value stocks that got mighty cheap during August.

Read more »

Value spelt out with a magnifying glass.
Value Investing

Here's how I'd invest $2,000 in ASX value shares right now

I’m going to talk about three different ideas that could be great value.

Read more »