Record-high stock markets aren't exactly the hunting ground for ASX value shares. And with the broad S&P/ASX 200 Index (ASX XJO) charging north, investors may feel like value opportunities are slipping away.
When share prices surge, the hunt for value becomes trickier. But not impossible. Legendary investors like Warren Buffett remind us that, even in a hot market, savvy investors can still find value… if they know where to look.
Here's where I would start looking for ASX value shares, with two names in mind — ResMed Inc (ASX: RMD) and WiseTech Global Ltd (ASX: WTC). Let's see how they fit into the value equation.
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Finding value in a sea of green
It's important to stress that value isn't just low prices or valuation multiples. As Buffett himself said, price is what you pay, value is what you get.
The iShares Core S&P/ASX 200 ETF (ASX: IOZ) is an exchange-traded fund (ETF) that tracks the performance of the ASX 200 index.
It's not the actual market but a reflection of it. It is currently trading at a price-to-earnings (P/E) ratio of more than 20 times, meaning it is running hot.
According to The Australian Financial Review, independent investment consultant Giselle Roux thinks finding value in an expensive market goes beyond dividends and traditional valuation metrics.
She argues that a company with strong fundamentals and the ability to deliver long-term growth can still provide value, even without paying dividends.
Roux noted the "long history of purely buying stocks on a dividend basis" due to franking credits, but said it "often becomes a flawed outcome".
Meanwhile, the investment consultant has eyes on two potential ASX value shares, ResMed and WiseTech, telling the AFR:
I think some of the best companies in Australia – the ResMeds and the WiseTechs – are in that kind of area. That's where a thoughtful investor will find the right companies.
Is ResMed an ASX value share?
ResMed has been a standout performer in 2024, with its share price up 38% this year to date.
The company's fundamentals were on display in its latest quarterly results, with 9% revenue growth and 3.5 percentage point growth in gross margin.
Many analysts, including those at Morgans, believe the company still offers value for long-term investors.
The broker notes that ResMed's strong market share in sleep apnea, an area still largely underserved, sets it apart.
Even with concerns about new weight-loss drugs entering the healthcare space, Morgans believes ResMed's core market remains largely unaffected.
It is also rated a buy from the consensus of analyst estimates, according to CommSec data.
WiseTech: More to give?
WiseTech Global shares have also seen huge gains in 2024, up 75% so far this year.
While this rise might suggest it's fully valued, some brokers argue that there's still room for growth.
Those at Peloton Capital see value in the ASX share and rate it a buy with a $220 price target. With WiseTech shares currently swapping hands at $131.62 apiece, this is a hefty upside potential.
Benjamin Graham, Warren Buffett's first mentor and often dubbed the 'father of value investing', suggests a 'margin of safety' when buying shares.
This means buying stocks that are trading at a substantial discount to their estimated worth of intrinsic value.
In other words, those with a large gap between current price and estimated value. Based on Peleton's forecasts, WiseTech may qualify as an ASX value share here.
ASX value shares takeaway
In a high-flying market, the goal is to find ASX value shares with a balance of quality fundamentals and long-term growth potential.
Experts say ResMed and WiseTech might fit the bill here. ResMed has rallied 63.4% in the past 12 months and WiseTech is up 95.4%.
