Why I would grab today's cheap ASX shares before it's too late

Here's how to take advantage of stock market weakness.

| More on:
Happy man working on his laptop.

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

Recent share market weakness has been very disappointing. However, this could prove to be a great buying opportunity for patient investors.

That's because cheap ASX shares could potentially benefit significantly from a prolonged share market recovery. Particularly if their current prices include substantial margins of safety, which may offer substantial room for capital growth in a rising market.

Historically, a strategy of investing in such companies has proven quite successful. Therefore, given the presence of many cheap ASX shares with strong market positions and solid financials, now might be an opportune moment to capitalise on their attractive prices.

Promising returns from cheap ASX shares

Purchasing any asset at a lower price is generally a wiser choice than acquiring it at a higher price. That's because the approach can potentially yield greater capital returns since the market may not have factored in the asset's long-term growth potential into its current valuation.

Take for example Idp Education Ltd (ASX: IEL) or Endeavour Group Ltd (ASX: EDV). Both ASX 200 shares have been sold off this year due to short-term concerns but remain leaders in their field. If the market becomes positive on them again, they could have the potential to outperform the broader stock market during a recovery.

Focus on high-quality companies

It is worth remembering that not all cheap ASX shares are going to rebound when the market recovers. Some are cheap for a reason. That's why it is important to focus on high-quality companies.

If you buy cheap ASX shares that are facing structural headwinds, they may not rise with the market. They could even go in the opposite direction. Whereas you have a greater chance of generating market-beating returns if you focus on buying out-of-favour ASX shares that have strong business models, sustainable competitive advantages, and positive long-term growth outlooks.

All in all, I would suggest investors don't get down when they see the market in the red again, get greedy instead.

Motley Fool contributor James Mickleboro has positions in Endeavour Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Idp Education. The Motley Fool Australia has recommended Idp Education. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Cheap Shares

a smiling picture of legendary US investment guru Warren Buffett.
Cheap Shares

I'm listening to Warren Buffett and buying cheap ASX shares

Attractively valued ASX shares are a great call right now, in my view.

Read more »

Dog with a shoe in its mouth.
Cheap Shares

I think these 2 cheap ASX shares are buys for value investors

These businesses could be too cheap to ignore.

Read more »

An Australian farmer wearing a beaten-up akubra hat and work shirt leans on a fence with livestock in the background and a blue sky above.
Cheap Shares

Why I think these 2 ASX 300 shares are steals

These ASX shares have a lot of potential, in my view.

Read more »

Smiling couple looking at a phone at a bargain opportunity.
Cheap Shares

2 cheap ASX 200 shares that look too good to ignore today

Cheap shares are hard, but not impossible, to find right now.

Read more »

A cool dude looks back at the camera while ziplining above the treetops.
Cheap Shares

2 great ASX shares to buy in July: experts

These companies have a lot going for them. Here’s why.

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Cheap Shares

In an expensive market, 2 ASX 200 companies too cheap to ignore

These two businesses seem far too cheap for what could happen next.

Read more »

a man and a woman kneel in a boxing ring with exaggerated make-up injuries, posing in humorous stance with the woman leaning back on her knees and the man leaning against her bright pink boxing glove as he gasps for air.
Cheap Shares

Is it time to buy these 2 beaten-up ASX shares in 2025?

These ASX shares could be great buys right now.

Read more »

Man smiling at a laptop because of a rising share price.
Cheap Shares

Why this fund manager bought this ASX 300 share for bigger returns

A fund manager thinks good things can happen with this rising ASX share.

Read more »