If there's one investing principle Warren Buffett has repeated more than any other, it is to buy wonderful companies at fair or undervalued prices.
Not speculative names. Not the hottest trend. Just proven businesses that are temporarily trading below what they are truly worth.
It is a simple philosophy, but it is also one of the main reasons the Oracle of Omaha has outperformed the broader market for more than half a century, and it remains just as relevant today.
Even after the recent rebound in global markets, pockets of undervaluation still exist. And for long-term investors, these opportunities may be far more attractive than trying to chase whatever is surging right now.
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Warren Buffett doesn't hunt for cheap shares
Buffett has always made it clear that undervalued shares aren't the same as good value shares. A stock can look cheap on paper but still be a bad investment if the underlying business is deteriorating.
What Buffett actually looks for is value relative to quality, strong competitive advantages, durable earnings, talent management, and long-term tailwinds.
If a company ticks those boxes and the market is mispricing it due to short-term pessimism, that is when Buffett becomes interested.
This mindset has delivered decade after decade of outperformance, not through luck, but because buying undervalued high-quality businesses creates a natural margin of safety and amplifies long-term returns.
Powerful in uncertain markets
A common mistake that investors make is waiting for the perfect moment to buy ASX shares. Buffett doesn't try to predict market tops or bottoms; he simply focuses on value.
And when markets wobble, sentiment weakens, or headlines turn negative, that's when mispricings often occur.
Today's environment is a perfect example. There are plenty of high-quality ASX shares that trade well below their long-term averages. Think of companies such as CSL Ltd (ASX: CSL), which remains deeply discounted despite strong fundamentals, or Xero Ltd (ASX: XRO), which has been sold off far more than its long-term growth outlook deserves.
These situations don't guarantee gains. No investment does. But what they offer is a level of valuation support that speculative, overhyped sectors simply cannot match.
Buffett's point is simple: if you buy a high-quality business at a sensible price, you are already ahead, no matter what the market does next.
Foolish takeaway
Warren Buffett's advice hasn't changed in 60 years because it keeps working. Buy great businesses when they are good value, hold them for as long as you can, and let compounding do the rest.
Even with markets rebounding recently, there are plenty of high-quality ASX shares that still trade below what they're worth. For long-term investors, this may be the ideal moment to follow Buffett's lead.
