Warren Buffett is the world’s best-known value investor. The Oracle of Omaha honed his talent as a student of the legendary Benjamin Graham at Columbia University. He took that education and created arguably the most valuable investment vehicle, Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B).

Since becoming chairman in 1965, Buffett has generated returns at Berkshire of 3.7 million percent. That’s about a 20% compounded annual return, or about twice that of the S&P 500. There’s a reason value investors flock to Omaha every year to hear what the Oracle has to say.

Buffett’s stock-selecting strategy is deceptively simple: Buy fundamentally good companies trading below their intrinsic value and hold onto them for the long haul. Although market manias make finding discounted stocks difficult at times, Buffett and his managers always manage to find one or two stocks to buy, even today when the broad market index is approaching all-time highs.

What follows are three cheap Warren Buffett stocks on a forward price-to-earnings (P/E) basis that you don’t want to ignore. 

Ally Financial (ALLY)

Direct-to-consumer digital banking outfit Ally Financial (NYSE:ALLY) is up 12% year to date but off 50% from its all-time high hit in early 2021. The stock tumbled further after regulators seized a number of high-profile banks earlier this year including Silicon Valley Bank and Signature Bank. Investor confidence in the financial sector remains shaken.

It doesn’t help that Ally has significant exposure to the auto industry. With high interest rates, financing a car is more expensive, lowering demand. Car dealers are cutting prices to drive traffic but it’s a dicey situation nevertheless. Yet Ally is in fine financial shape. It ended the third quarter with 3 million customers and $153 billion in total deposits. Some 92% of those deposits are FDIC-insured. Ally also has an industry-leading customer retention rate of 96%. The bank pays an attractive dividend yielding 4.3% annually.

Buffett owns 29 million shares of the bank — an almost 10% stake in Ally — worth $797 million. The stock trades at a 20% discount to Wall Street’s consensus price target, put it at an attractive entry point.

Capital One Financial (COF)

Capital One Financial (NYSE:COF) is another financial stock reeling from the banking crisis earlier this year. Its stock bounced back smartly, though. Shares are 16% higher this year but 38% below its August 2022 all-time high. It trades at a forward P/E of 7.9. But the worsening economic situation is wreaking havoc on the global banking concern.

Although net charge-offs of $2 billion eased sequentially in the third quarter, they remain over twice as high compared to where they stood a year ago. Ally’s $15 billion allowance for credit losses is also 22% above last year. The credit card specialist also reported its “stress capital buffer requirement” rose from 3.1% last year to 4.8% this year.

As much as interest rates are impacting its customers, they’re also boosting Capital One’s bottom line. Earnings of $4.45 per share were up 6% year over year and 26% higher sequentially. Its dividend yields 2.2%.

Buffett’s been a buyer of Capital One stock. He increased his holdings by about 25% in the second quarter. He owns 12.5 million shares worth $1.3 billion. COF stock trades at a 12% discount to analysts’ one-year price target.

Although vulnerable to a worsening economy, Capital One Financial trades at price-to-sales valuations not seen since the financial markets collapse of 2008-2009. The price-to-tangible book value of 1.06 is at a record low.

D.R. Horton (DHI)

Homebuilder D.R. Horton (NYSE:DHI) should also feel the effects of a weakened economy. The housing market seems particularly shaky but is in a unique position. Although interest rates are soaring, causing the cost of a mortgage to skyrocket, buyer demand isn’t falling. Moreover, sellers are reluctant to give up their low-rate mortgages. It’s creating a housing deficit, one that’s being filled by builders like D.R. Horton.

Its recent earnings report was more robust than what Wall Street anticipated. For the full fiscal year, the homebuilder closed on 82,917 homes, up from 82,744 last year. DHI stock is now 22% above where it stood one month ago and 57% above last year. It trades at an 8.6 forward P/E.

You can say Buffett was prescient with his second-quarter purchase of D.R. Horton and other homebuilders. While many scratched their heads over why he would buy into an industry that looked poised to fall, it’s clear he read the market right.

Buffett bought more D.R. Horton stock than he did for any other homebuilder. He likely did so because the builder targets more affordable homes than other builders. The average home is around $380,000, below the national median price of $422,000. He owns 6.6 million shares of the biggest U.S. homebuilder now worth $777 million. At just 10x free cash flow, DHI is still a bargain.

On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.