One of my favourite stocks is up big over the past 12 months – 28% to be exact. Yet I still think it looks like a cheap ASX share today, with a current price-to-earnings (P/E) ratio of just 4.95.
To be clear, this particular ASX share has been a favourite of mine for many years, not just since it rocketed over the past year.
It is none other than MFF Capital Investments Ltd (ASX: MFF). MFF is a listed investment company (LIC). LICs aren't your usual ASX share. Instead of producing a good or service, MFF functions more similarly to a managed fund. It owns a huge portfolio of underlying investments that it manages on behalf of its investors.
There are many LICs on the ASX. Some popular examples include the Australian Foundation Investment Co Ltd (ASX: AFI) and Argo Investments Ltd (ASX: ARG). But MFF is one of the few that invests solely in international stocks.
MFF was founded by Chris Mackay, who is also a co-founder of Magellan Financial Group Ltd (ASX: MFG). Mackay is a disciple of Warren Buffett, and follows a Buffett-esque approach in running MFF. He typically buys what he sees as the highest-quality companies in the world, and simply holds them as long-term investments.
Some of MFF's core holdings include Visa, Mastercard, Alphabet, Amazon and American Express.
But let's talk about this company's valuation.
One of my favourite ASX shares is still cheap today
P/E ratios aren't always the best metrics to measure some kinds of companies' valuations. LICs like MFF generally fit into this category. As such, I don't look at MFF as a screaming bargain for that P/E ratio of 4.95 alone. But I still think it's looking like a cheap ASX share today. Why? Well, because MFF tells us so.
Every week, this company releases what the value of its underlying portfolio is sitting at. Its most recent report tells us that each MFF share buys you $4.29 worth of assets on a pre-tax basis, and $3.58 post-tax.
Right now, MFF is trading at a share price of $3.83.
This means we can buy one MFF share for $3.83, and get $4.29 worth of assets. That $3.58 post-tax value would only apply if the company had to sell its shares and pay taxes on its gains, which is just a hypothetical scenario.
So MFF remains one of my favourite ASX shares today. But I also regard it as one of the cheapest high-quality ASX shares you can buy right now, thanks to this intrinsic discount you can get on its underlying stock portfolio (made up of some of the world's best companies).
