I’d use the Warren Buffett method to create a ‘best ASX shares to buy now’ list

For Australian investors, there are literally hundreds of shares on the ASX to choose from. Finding the right ones can be an understandably daunting task. And buying them at the right price can be even harder. So who better to turn to for advice than the legendary investor Warren Buffett.

Buffett is the CEO of his investing conglomerate Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B). This company has run laps around the returns of the broader markets for decades now.

So today, let’s look at some pieces of Buffett wisdom that can help us create a ‘best ASX shares to buy now’ list. Our Foolish colleagues over in the US have a great list of Buffett quotes that we can draw from for inspiration.

So one of Buffett’s most important quotes is “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.

Buffett often talks about the ‘moats’ that his favourite companies possess. Just like the medieval fortification, an economic moat helps protect a company from usurpers. This moat can come in the form of pricing dominance, a strong brand, or the cost of switching to a rival product.

What does Warren Buffett look for in a ‘best share?

We can see this playing out in some of Buffett’s top holdings. Companies like the Coca-Cola Company, Apple and American Express have some of the strongest and most well-known brands in the world.

So our best ASX to buy now list should have companies that display this kind of resilience.

Think of the brand recognition of the Commonwealth Bank of Australia (ASX: CBA) across the country. Or the pricing power that Woolworths Group Ltd (ASX: WOW) has in selling food and household essentials. Or perhaps the cost of switching from Xero Limited (ASX: XRO)’s tax software to a rival.

All of these companies could well have the moats that it takes to be a ‘wonderful company’ in Buffett’s eyes.

But just finding a quality company is only half the battle. Buffett is also famous for waiting for the exact right moment to pounce.

As he once said, “A too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favourable business developments”.

Buffett loves to buy up shares when everyone else is selling, like say in a market crash. One of his most well-known sentiments is to be “greedy when others are fearful”.

He also says that these moments to be greedy are opportunities, but that “opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”.

So remember this advice next time there is a market downturn. It may be the best chance you ever get to purchase your favourite quality ASX shares on the buy list.

The post I’d use the Warren Buffett method to create a ‘best ASX shares to buy now’ list appeared first on The Motley Fool Australia.

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American Express is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Sebastian Bowen has positions in American Express, Apple, Berkshire Hathaway (B shares), and Coca-Cola. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Berkshire Hathaway (B shares), and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended Apple and Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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