How I’d aim to find top shares to buy in March 2021

Comparing companies with their peers and considering how they might change in future could allow an investor to find the top shares to buy today.

asx share price on watch represented by investor looking through magnifying glass

Image source: Getty Images

Finding top shares to buy in March 2021 could prove to be a tough process. The stock market has rallied after the 2020 market crash. As such, some companies may now appear to be overvalued based on their financial prospects.

However, it may still be possible to unearth top stocks that offer a mix of competitive advantages, solid finances and low valuations. Such companies could offer favourable long-term growth opportunities relative to other businesses.

Searching for top shares where other investors are not looking

A good place to start when searching for top shares could be unpopular sectors. Other investors may have disregarded them based on a variety of factors, including their uncertain prospects or a rapid pace of change that is taking place. This may provide opportunities to buy high-quality companies when they are trading at attractive prices.

Clearly, every investor will have their own version of what represents an attractive company. However, it could include those businesses that have solid financial positions and the capacity to adapt to a changing economic outlook. Through looking for such businesses where other investors are not spending much time doing likewise, it may be possible to unearth the most appealing buying opportunities following the stock market rally.

For example, investors may not be especially upbeat about the prospect of finding top shares in sectors such as financial services or energy at the present time. They face difficult operating conditions that could lead to losses for investors in what remains a precarious economic environment. However, by identifying the strongest businesses within such sectors, it may be possible to find undervalued companies within them.

Comparing stocks to their peers

Once a potential buying opportunity has been found, it may be a good idea to make a comparison with sector peers. This can provide a guide as to whether it among the top shares to buy today.

For example, two companies operating in the same sector may have similar valuations. However, one business could have a wider economic moat, such as a unique product or strong brand, that reduces its overall risks. Similarly, two stocks could have wildly different valuations – even though they have similar cost bases and revenue drivers. This may mean there is a misprising opportunity that can be exploited by investors.

Assessing a company’s quality

Clearly, the future is always a known unknown. Even top shares that offer a mix of low prices and solid financial prospects can underperform the market. They may even fail to deliver a positive return in the coming years.

However, by taking the time to analyse specific sectors that may be unpopular at the present time, it may be possible to obtain a relatively attractive risk/reward ratio. Over time, this may lead to attractive portfolio returns.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Best ASX Shares

Three travellers laughing and smiling outside airport
⏸️ Best ASX Shares

If you’d invested $2,000 in Webjet (ASX:WEB) shares 10 years ago, here’s what it would be worth now

The travel expert has proved a winner for long-haul investors...

Read more »

illustration of three houses with one under a magnifying glass signifying mcgrath share price on watch
⏸️ Best ASX Shares

The 5 best ASX real estate shares of the 2021 financial year unmasked

Office space, industrial storage, retail malls and residential. These companies cover them all.

Read more »

asx share price increase represented by golden dollar sign rocketing out from white domes of lithium
Energy Shares

5 best ASX energy shares of the 2021 financial year revealed

As the world emerged from initial COVID lockdowns, the demand for energy soared.

Read more »

best asx 200 shares of financial year 2021 represented by 2021 formed with gold piggy bank
⏸️ Best ASX Shares

Meet the best performing ASX 200 shares of FY21. Are yours on the list?

These companies have been crowned the best of the best in FY21...

Read more »

retail asx share price represented by shopping trolley full of cash
⏸️ Best ASX Shares

How I’d build a ‘best stocks to buy now’ list

Focusing on the quality and prices of companies from a diverse range of sectors could make it easier to build…

Read more »

Brest ASX shares represented by piggy bank surrounded by autumn leaves
⏸️ Best ASX Shares

Top ASX shares to buy in March 2021

Our Foolish contributors have compiled a list of some of the ASX shares experts are saying to Buy in March.…

Read more »

rising asx share price represented by man with arms raised against blackboard featuring images of dollar notes
⏸️ Best ASX Shares

Why the Wesfarmers (ASX:WES) share price has soared 24% in a year

The Wesfarmers Ltd (ASX:WES) share price has been a solid performer over the past year. Here's why this ASX blue…

Read more »

Deterra share price royalties top asx shares represented by investor kissing piggy bank
⏸️ Best ASX Shares

Top ASX shares to buy in February 2021

Our Foolish contributors have compiled a list of some of the ASX shares experts are saying to Buy in February.…

Read more »