Today, we’ll look at the best shares to buy right now that we think are undervalued stocks on the ASX in 2023.
Undervaluation can come from a few factors – these include competition strength, higher risk future valuations and most commonly, intrinsic value missed by investors.
Best Shares to Buy Right Now which are Undervalued Stocks on the ASX
These stocks are the best share to buy right now as they show strong potential but are considered to be undervalued stocks as they have not necessarily rallied along with the rest of the market.
Unlike dividend-paying blue-chip shares which tend to hold their value better, these stocks tend to be higher risk.
If you are looking for something with an even higher risk for a better potential return, we have a list of the 5 best penny stocks on the ASX.
Corporate Travel Management (ASX:CTD)
Corporate Travel Management (ASX:CTD) is a travel services provider based in Australia with operations across the globe.
After being one of the worst-hit sectors during the COVID pandemic, the sector is finally showing a strong rebound after a couple of false starts through 2021 and 2022.
The company is well-placed to capitalize on demand surpassing pre-COVID levels with excess capacity on hand to meet demand and synergies from acquisitions on the cusp of kicking in.
Corporate Travel Management (CTM) is a travel services company that provides corporates with a bouquet of travel services such as travel/itinerary planning, event travel planning, etc.
The company’s operations are spread out over North America, Europe, Asia Pacific regions, and ANZ.
CTM is a very technology focussed company that provides bespoke travel software that gives them access to global locations with transparent pricing, planning, and capacity availability along with other metrics.
IGO Limited (ASX: IGO) is an Australian-based mining company that focuses primarily on the exploration and production of nickel and lithium with a market value of $10.57 billion. Their operations are divided between these two valuable metals, which are essential components for batteries and other electronics.
The booming EV market has driven the increase of demand for lithium-ion batteries in electric vehicles and brought significant benefits through the strategic shift towards lithium production.
Despite a downturn in the lithium price due to oversupply, we believe lithium will make a comeback in the near future as the EV market continues to boom and demand starts to outstrip supply.
Xero is one of Australia’s biggest and most successful tech companies.
The company has slowly morphed from a niche SaaS (Software-as-a-Service) company into a tech conglomerate due to strong sector tailwinds and gradual but consistent growth.
Even through the rough macro environment of 2022, the company managed to grow reasonably well owing to the product’s non-discretionary nature.
The pandemic accelerated the already rapid growth of digitisation and business processes, a trend from which Xero has benefited hand over fist.
However, At the current XRO share price, Xero shares have corrected about 42% from its all-time high despite doubling the Lifetime Value of its customer base and growing its monthly revenue run rate by 34%.
Fortescue Metals (ASX:FMG)
Fortescue Metals Group is a pure-play iron ore producer with the fourth-largest capacity in the world. The company is also morphing into a leader in mining decarbonisation and green hydrogen through its Fortescue Future Industries subsidiary. FMG hit a rough patch after China’s property sector landed in a debt crisis and iron ore prices slumped from their 2021 highs.
Despite depressed prices and slowing demand from China’s zero-Covid policy, FMG continued record production and despatch in the nine months ended March 2023.
The stock has faced selling pressure after the latest quarterly update with investors fearing a further decline in iron ore prices.
Sayona Mining (ASX:SYA)
Sayona Mining (ASX:SYA) is an up-and-coming multi-asset miner based in Australia.
The company is on the verge of commencing operations at its Northern American Lithium (NAL) project in Quebec.
The company has had a head-spinning 1670% rally since its acquisition of NAL in December 2020 and brought it online in record time and at budget.
While the stock has been soft this year with a 21.1% underperformance to the ASX200 due to a correction in lithium prices, it is still rather fairly valued with a high chance of a serious re-rating once it commences downstream production and develops other assets.
How We Pick The Best Shares To Buy Right Now
Stock markets are generally driven by three factors within the markets.
Understanding these forces helps us time the market and buy or sell stock at the most opportune moments.
In general, the markets and stocks are firstly driven on a short-term basis via supply and demand imbalances.
This is the order flow on a day to day basis as investors buy or sell a stock for different reasons.
This order flow is generally hard to forecast and requires strong technical analysis and understanding of the underlying market to properly time.
Secondly, markets and stocks are driven by macroeconomic forces in the medium-term.
Factors include but are not limited to changes in interest rates, consumer sentiment, government policies and so forth.
Understanding the nuances and how the different countries interact with each other in terms of trade and politics is key to understanding the forces that drive the markets as a whole.
Finally, stocks in the long-term are driven by fundamentals. Factors include but are not limited to quantitative factors such as earnings growth, profit margin and return on equity.
Qualitative factors include factors such as competition, operating environment, political and policy environment.
To be able to pick the best shares to buy now, it is essential to combine market timing, macroeconomic and fundamental analytics.