I view Warren Buffett as one of the world's greatest investors because of how he has led steered Berkshire Hathaway to investment returns of approximately 20% per year over the past 6 decades. I'm using some of his advice to target cheap ASX shares.
Of course, he hasn't actually called me and said I should buy cheap ASX stocks. But, in the current investing environment I think it makes a lot of sense to look at cheap businesses.
The S&P/ASX 200 Index (ASX: XJO) is close to its all-time high. That means that many of the underlying businesses are close to their all-time highs.
Over time, share prices are likely to rise if businesses are growing their profits. But, valuations can become stretched in they run too hard too quickly. The higher price/earnings (P/E) ratios (and other similar metrics) go, the more thoughtful I'd be about which investments I'd buy.
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Warren Buffett advice
To me, a cheap ASX share doesn't necessarily mean the businesses with the lowest P/E ratios on the ASX. But, a cheap stock could be one that has fallen recently, if it's trading on a lower P/E ratio or if it's trading at a price that's lower than its net asset value (NAV).
There are a couple of pieces of advice from the Berkshire Hathaway talisman that is really relevant to the current situation.
Buffett said:
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Another quote that he has said which I believe is very relevant includes:
Price is what you pay. Value is what you get.
Finally, Warren Buffett has noted how great businesses usually win over the long-term:
Time is the friend of the wonderful company, the energy of the mediocre.
Cheap ASX shares
There are a few businesses I think look very appealing in the current investment market.
Singapore telco Tuas Ltd (ASX: TUA) and Mexican restaurant business Guzman Y Gomez Ltd (ASX: GYG) have been seen their share prices decline, but I believe they have huge growth potential in the coming years with strong progress in existing markets and the potential to grow into new countries.
Propel Funeral Partners Ltd (ASX: PFP) shares are down around 20% since the start of 2025, but it's exposed to the long-term growth tailwinds of Australia's ageing and growing population. This is a buy-the-dip opportunity in my view.
MFF Capital Investments Ltd (ASX: MFF) invests in plenty of the world's highest quality businesses with growth potential and I like the flexibility it has to invest wherever it sees potential. However, it's trading at an approximate discount of 10% to its asset value, making this an appealing time to invest, in my view.
They aren't the only cheap ASX shares out there, but these are some of the main ones I'm focused on right now with Warren Buffett's advice in mind.
