I’m looking to emulate Warren Buffett and buying these stocks now!

Warren Buffett is one of the most successful investors of our time. The 92-year-old has amassed a fortune of more than $100 billion.

But what makes them successful? Yes, they use value investing strategies. This is an investment approach that involves selecting stocks that appear to be trading below their intrinsic or book value.

At the end of the last century, value investing strategies outperformed index returns in most markets. So, how can one imitate the so-called Oracle of Omaha?

Stocks are undervalued

Investing in undervalued stocks is an integral part of a value investing strategy. But I have to find him first.

This is where I have to do my own research.

There are simple and close metrics like the price-to-earnings ratio, or enterprise value-to-EBITDA. Then there are the more complicated ones, like the discounted cash flow (DCF) model.

These metrics can help you get an idea of ​​what discounts to offer. Buffett is known to look for a margin of safety of around 30%, or even more. That is, the value of the stock is found to be around 30% higher than the stock price.

UK stocks

Buffett doesn’t seem to have much interest in UK-listed stocks. But this may be because he likes to stick with those who know best.

However, I can apply his lessons when investing in UK stocks. And now might be a good time to apply that learning.

That’s because many parts of FTSE now depressed. And this is the market where I am most likely to find undervalued stocks.

Undervalued option

UK banks are a good place to start when looking for potentially undervalued stocks. DCF calculations suggest that both Lloyds and Barclays undervalued up to 60% and 70%.

This is good, because Buffett told us to focus on quality, and this is a quality institution.

Both stocks saw profits grow due to higher interest rates. But higher rates are a double-edged sword. With customer repayments rising and the economy slowing, the proportion of bad loans in the loan book is increasing.

But despite recession concerns, the high interest rate environment is seen as a big tailwind for banks.

I have added up on both of these stocks in the past month. But I would still buy another one now.

Rolls-Royce is another undervalued pick I bought more. Calculations show that it is undervalued up to 50%.

There is a natural concern that debt could weigh on future cash flows (but Rolls is a leaner business than ever). It is also more difficult than usual to predict future cash flows because the business has changed over the past three years.

I am a little worried about the new CEO Tufan Erginbilgic who labeled the engineering group as “burning platform” which is at the end of the chance. But for the most part, he believes performance can improve. And I’m optimistic too.

My final choice is Airtel Africa. The DCF calculation suggests a fair value of 500p, which is higher than the current price of 117p. It operates in a highly competitive sector, but there is enormous growth potential in the African telecommunications and payments market. That’s why I want to add it to my portfolio.