There are plenty of ASX shares that have seen their prices plummet this year.
So it's an excellent time for buying up some bargains.
But investors do need to be selective.
They need to think about whether a particular stock is cheap for legitimate reasons or if the sell-off has been excessive.
It is crucial to avoid the cognitive trap of anchoring. That is, thinking a stock could rise from $2 to $10 just because it previously reached a high of $10.
Shares have no memory. The current and future performance of the underlying business is all that matters.
Fortunately for The Motley Fool readers, one expert has nominated two ASX shares to buy that he believes are cheaper than they should be.
Image source: Getty Images
'Focus on increasing profitability'
With the Reserve Bank just raising interest rates four consecutive months, it's a tough time for lenders.
But Wilsons investment advisor Peter Moran told The Bull he feels like Plenti Group Ltd (ASX: PLT) has much going for it.
"The online lender has generated solid loan growth in recent years, driven by its personal and automotive lending divisions."
Plenti shares have halved in value so far in 2022.
Moran admitted conditions have been challenging for the business, but reckons it is adapting.
"Plenti's level of new originations in the first quarter of fiscal year 2023 fell by 10% on the prior quarter," he said.
"However, this reflects its focus on increasing profitability at a time of rising interest rates."
Analyst coverage is sparse for the small cap. However, according to CMC Markets, at least Shaw and Partners agrees with Wilsons that Plenti shares are a buy at the moment.
Sell-off of this stock has been 'overdone'
Silk Laser Australia Ltd (ASX: SLA) shareholders have also had a stressful time, watching their investment halve since October.
Moran reckons the stock price weakness doesn't fairly reflect its prospects.
"The share price of this laser clinic operator reflects a weak outlook, but we believe it's been overdone," he said.
"Although consumer spending is likely to fall in response to higher interest rates, we expect personal service providers, such as Silk, to benefit as consumers focus on what's most important to them."
Will customers of the cosmetic services provider stay loyal through an economic downturn?
At least a couple of Moran's peers agree that they will. Two analysts surveyed on CMC Markets rate the stock as a buy.
Silk Laser's last update in April pleased investors, pushing the stock 12% higher that morning. It will report its full-year results on 24 August.
