If history repeats itself, March could be one of the BEST times to buy cheap ASX shares

History doesn't repeat but it often rhymes. Here's what 10 years of historical ASX All Ordinaries data says about buying in March.

| More on:
A woman peers through a bunch of recycled clothes on hangers and looks amazed.

Image source: Getty Images

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

Sometimes history can be a good teacher. As 26th US President Theodore Roosevelt said, "The more you know about the past, the better prepared you are for the future." And if the last 10 years of the All Ordinaries (ASX: XAO) is anything to go by March could be a prime opportunity for scooping up cheap ASX shares.

As with most things in life, markets tend to ebb and flow in a seasonal stream. The Santa rally, tax time selling, and other timely phenomena are clear examples of how share prices fluctuate depending on the time of the year.

However, it should be noted that the market also has a habit of being unpredictable. If past patterns mirrored the future, we'd all be rich. So, taking these patterns with a grain of salt is important — they are always susceptible to change.

What does history show?

Although it is far from certain, the past 10 years of data suggest this month could produce a fall in the All Ords index. Ironically, the Aussie benchmark of the 500 top ASX shares is up 1.9% as of Friday afternoon. Still, 21 days are left in March, so we best not count our chickens before they hatch.

So, what do the last 10 years say about March and whether it is primetime for buying cheap ASX shares?

Source: S & P Market Intelligence

Well, the average return of the All Ords in March between 2014 and 2024 is a 1.2% decline. The only month to have performed worse is September, diving 2.4% on average over the past decade. Based on this, history would suggest this is one of the best times (second to September) of the year to be a buyer of shares.

If we inspect the data further, I find the following interesting information:

Best March return in the past 10 years: 6.4% increase in March 2022

Worst March return in the past 10 years: 21.5% fall in March 2020

The catastrophic crash in 2020 due to the COVID-19 pandemic drastically impacted the average March return. If we remove this outlier, the average for this month jumps to a 1% gain.

Which ASX shares could be cheap?

History aside, if March pans out to be a good month to buy shares, what companies are currently cheaply valued?

It's almost a loaded question because a reduced share price doesn't always present value. Sometimes the 'cheap ASX shares' are the ones with share prices soaring ahead as the rest of the market trembles.

Even so, a low forward price-to-earnings (P/E) ratio can sometimes be a decent starting point.

Some of the most cheaply rated companies inside the ASX All Ords right now include:

  • Macmahon Holdings Ltd (ASX: MAH) — 4.7 times forward P/E
  • AGL Energy Limited (ASX: AGL) — 7.7 times forward P/E
  • Fortescue Ltd (ASX: FMG) — 9.2 times forward P/E

It always pays to delve deeper, beyond the P/E ratio, to understand better whether an ASX share is truly cheap.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

More on Cheap Shares

Person with a handful of Australian dollar notes, symbolising dividends.
Cheap Shares

2 cash-rich ASX companies to buy now

Here are two ASX-listed shares boasting substantial cash reserves.

Read more »

A woman scratches her head, is this a no-brainer?
Cheap Shares

Are Woolworths shares a no-brainer buy?

Analysts see huge value in this retail giant's shares at current levels.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Cheap Shares

'Undervalued': 3 ASX 300 shares to buy following significant share price falls

Experts have named these ASX shares as buys.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Cheap Shares

2 ASX 200 shares this fund manager rates as really cheap buys

These 2 ASX shares could be too good to ignore.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Cheap Shares

2 cheap ASX dividend shares I'd buy now for future income

These stocks look good value to me and pay good yields.

Read more »

Two excited woman pointing out a bargain opportunity on a laptop.
Cheap Shares

How I'd try to turn an empty portfolio into $300k by buying cheap ASX shares, starting now

If I was looking for cheap ASX shares today, here's what I'd buy.

Read more »

Couple looking at their phone surprised, symbolising a bargain buy.
Cheap Shares

3 ASX shares that look way too cheap to ignore right now

Analysts think these shares could be in the bargain bin right now.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Cheap Shares

2 cheap ASX shares to add to your portfolio before they get expensive

Analysts think these shares are undervalued at current levels.

Read more »