Recent volatility on the ASX has likely left many quality shares trading for dirt-cheap prices – and that's good news for long-term investors.
Buying undervalued shares amidst market downturns means shareholders might have a greater chance of taking advantage of market cycles and capitalising on a future recovery.
Though, investors should be wary that not all troubled stocks will post a recovery.
Historically, however, the market has always returned to – and surpassed – its previous highs following a downturn. Plenty of cheap ASX shares might be gearing up to outperform over the coming decade.
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Is now a good time to hunt for bargain stocks?
The ASX has struggled to gain traction amid soaring inflation, rising interest rates, and global turmoil in 2022.
Indeed, the S&P/ASX 200 Index (ASX: XJO) has fallen 6% year to date while the benchmark All Ordinaries Index (ASX: XAO) has dropped 7%.
That's better than the pain felt on Wall Street. The Dow Jones Industrial Average Index (DJX: .DJI), the S&P 500 Index (SP: .INX), and the Nasdaq Composite Index (NASDAQ: .IXIC) all succumbed to bear markets this year.
Of course, plenty of ASX shares have fallen alongside global markets.
Many might have dumped a chunk of their value for good reason, such as structural or financial uncertainties. Others, however, might be unfairly undervalued due to the market's own uncertainties. These are the stocks I'd be hunting right now.
How I'd find cheap ASX shares to hold for 10 years
It can be tricky to discern which ASX shares are trading cheaply for good reason, and which might be being overlooked by the market.
Personally, I would be seeking out cheap shares with a strong balance sheet, competitive advantages over their peers, and a history of coming out of tough times stronger. In my opinion, such stocks are more likely to outperform their peers over the coming decade.
I would also delve into a company's reports to calculate metrics such as its price-to-book (P/B) ratio and price-to-earnings (P/E) ratio. Doing so might help gauge if an ASX share is, indeed, trading for a dirt-cheap price.
Finally, I would hunt for multiple shares across various sectors so to diversify my portfolio. Diversification can help manage some of the risks involved in investing.
