In a hot market, the undervalued Australian shares to buy now

With the S&P/ASX 200 Index (ASX: XJO) trading around 8,863.1 points, just shy of its record high, it’s easy to assume that most opportunities have already passed us by. When markets run hot like this, value can feel scarce and new ideas harder to come by.

But broad index levels often hide what’s really going on underneath the surface. Even in strong markets, individual Australian shares can fall out of favour for company-specific or sector-specific reasons, creating pockets of opportunity for investors willing to look past the headlines.

Right now, I think that’s the case with a handful of Australian shares that have all touched 52-week lows this week, despite operating businesses that still have meaningful long-term potential.

Aristocrat Leisure Ltd (ASX: ALL)

Aristocrat Leisure is a good example of how sentiment can swing faster than fundamentals.

The share price weakness reflects concerns about slowing growth in parts of its business, particularly in digital, alongside a more cautious outlook from the market. But stepping back, Aristocrat still holds a dominant position in regulated gaming markets, especially in North America, where its land-based gaming operations continue to generate strong cash flows.

What I find compelling is that this is not a structurally broken business. Management has acknowledged near-term softness, but the long-term drivers remain intact, including content leadership, recurring revenue from installed machines, and disciplined capital allocation. In a market near record highs, a high-quality global operator like this trading at a 52-week low stands out to me.

CAR Group Ltd (ASX: CAR)

CAR Group is an Australian share where the market appears to be extrapolating short-term concerns too far into the future.

CAR’s platforms dominate online automotive listings across multiple geographies, and its business model is highly scalable with strong margins. The recent share price weakness has been driven by concerns around AI disruption, tech valuations, and cyclical softness in vehicle markets.

However, CAR has navigated these cycles before. Its platforms remain mission-critical for dealers, and pricing power tends to reassert itself as conditions normalise. Importantly, the company continues to invest in data, digital tools, and international expansion, which supports long-term earnings growth.

Seeing a business of this quality hit a 52-week low while the broader market is near its peak is exactly the sort of disconnect I like to pay attention to.

Temple & Webster Group Ltd (ASX: TPW)

Online furniture seller Temple & Webster Group has arguably been hit hardest by sentiment.

The housing slowdown, cost-of-living pressures, and weaker discretionary spending have all weighed on the outlook for furniture retailers. That has pushed Temple & Webster’s shares to a 52-week low, despite the company continuing to grow revenue and gain market share online.

What makes this interesting to me is the longer-term shift toward online furniture retailing, which is still underpenetrated in Australia. Temple & Webster’s asset-light model, strong brand recognition, and growing customer base position it well for an eventual recovery in housing activity and consumer confidence.

This is clearly a higher-risk name than the others and its shares are still not conventionally cheap, but I believe it offers significant upside if conditions improve.

Foolish takeaway

When markets are strong, it often pays to look where others aren’t. Aristocrat Leisure, CAR Group, and Temple & Webster have all been pushed to 52-week lows at a time when the ASX 200 is hovering near record levels.

That doesn’t mean they are risk-free. But it does suggest that a lot of pessimism is already reflected in their share prices. For investors willing to think beyond the next quarter, I believe these undervalued Australian shares are worth a closer look, even in a hot market.

The post In a hot market, the undervalued Australian shares to buy now appeared first on The Motley Fool Australia.

More reading

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• 3 ASX 200 shares trading at 52-week lows: Are they a buy?
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• Why these ASX 200 shares could be dirt cheap

Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group. The Motley Fool Australia has recommended CAR Group Ltd and Temple & Webster Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.