Now could be an opportunity to snap up overlooked ASX shares

I think some stocks could be bargain opportunities right now.

| More on:
A man wakes up happy with a smile on his face and arms outstretched.

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

This could be an excellent time to consider overlooked ASX shares that the market is underestimating. Good investing is usually about finding assets that are underpriced for their long-term potential.

The ASX share market regularly experiences bull and bear markets, during which investors may be too optimistic or pessimistic.

Sometimes, the most compelling investments could be the most unloved ones.

At times like this, I like to refer back to several excellent pearls of wisdom from legendary investor Warren Buffett. Buffett's ability to make the right investments at the right time has helped Berkshire Hathaway become one of the world's largest companies.

Warren Buffett's wise advice

In 2001, Buffett compared beaten-up stocks to hamburgers:

To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the 'Hallelujah Chorus' in the Buffett household. When hamburgers go up in price, we weep. For most people, it's the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don't like them anymore.

One of Buffett's most quoted pieces of advice could be helpful to keep in mind:

Be fearful when others are greedy, and be greedy when others are fearful.

This could be applicable to beaten-up stocks and sectors.

Which ASX shares are overlooked?

Each investor may have a different opinion on what ASX shares are being undervalued.

I think it'd be fair to judge ASX bank shares, like Commonwealth Bank of Australia (ASX: CBA), as being fully priced at close to 52-week highs. Plenty of ASX tech shares, like WiseTech Global Ltd (ASX: WTC) and REA Group Limited (ASX: REA), are also close to 52-week highs.

In terms of people being fearful and avoiding discounted hamburgers, I'd suggest ASX retail shares could be a fruitful place to look for contrarian investing regarding overlooked ASX shares. Households are struggling amid a high cost of living, but I don't believe the difficult retailing conditions will last forever. A recovery by 2026 could boost share prices of retailers.

For example, the Accent Group Ltd (ASX: AX1) share price is down 18% since its 2024 peak in February and it's down around 25% from April 2023, as shown on the chart below. The shoe retailer is responsible for various shoe brands in Australia, including The Athlete's Foot, Skechers, Vans and Ugg. I think its earnings growth could bounce back within a couple of years, particularly if it keeps growing its store network in the medium term.

Another example of a compelling overlooked ASX share may be homewares and furniture retailer Adairs Ltd (ASX: ADH). The Adairs share price has fallen 36% since March 2024 and has fallen 65% since June 2021. I think revenue and profit will be challenged in the short term. Still, profitability could recover noticeably by FY26 if economic conditions improve (such as the start of interest rate reductions to a more neutral level). The ASX retail share is working on upsizing some Adairs stores (making them significantly more profitable) and growing its Focus on Furniture store network.

Other compelling, currently somewhat unpopular ASX shares to consider could be AGL Energy Ltd (ASX: AGL) and Collins Foods Ltd (ASX: CKF), which I covered here and here.

Motley Fool contributor Tristan Harrison has positions in Accent Group and Collins Foods. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs, Berkshire Hathaway, REA Group, and WiseTech Global. The Motley Fool Australia has positions in and has recommended Adairs and WiseTech Global. The Motley Fool Australia has recommended Accent Group, Berkshire Hathaway, Collins Foods, and REA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Opinions

Three women cruise along enjoying ice-creams in the sunshine.
Dividend Investing

Passive income powerhouses! 3 ASX shares I'd consider buying for rising dividends

Here are three ASX dividend shares that I think are worth considering today.

Read more »

Man waiting for his flight and looking at his phone.
Growth Shares

Near its 52-week low, this ASX growth stock could be the bargain of the year!

I think this stock could be a leading opportunity.

Read more »

Two kids in superhero capes.
Small Cap Shares

2 ASX small-cap shares I'd buy for massive growth potential

I’m bullish about these two stocks.

Read more »

a man at the wheel of car with dashboard in view, driver technology shares,
Opinions

Is this ASX All Ords retail stock too cheap to ignore?

It's tough to be a retailer, but is the market punishing this ASX small cap share too much?

Read more »

Three kids with attitude
Opinions

3 lower-risk ASX shares I think are perfect for beginners

Here are three ASX shares that are ideal for risk averse investors, in my opinion.

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
Opinions

Why I'm planning to buy Guzman y Gomez shares and own for the long-term

I think this business has a strong outlook.

Read more »

Two people comparing and analysing material.
Opinions

Are BHP or Wesfarmers shares a better buy?

Should investors be more interested in the owner of Bunnings or Australia’s biggest miner?

Read more »

Woman with a moving box on her head.
Opinions

1 ASX small-cap stock that could benefit from the rental crisis

Noticed the rental market shortage? This may be an opportunity for this ASX small-cap share.

Read more »