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Leading broker rates these 3 shares as a BUY

Although broker recommendations should never be relied upon solely for investment decisions, I still think they can provide investors with useful information and ideas.

With that in mind, here are three shares that Bell Potter has recently reviewed and rated as a ‘buy’:

National Australia Bank Ltd. (ASX: NAB)

Bell Potter is looking forward to NAB’s first half result, which will be released on 4 May. The broker is forecasting cash NPAT of $3.2 billion alongside an interim dividend of 97 cents per share. Interestingly, this would represent a 2 cent decline in the dividend and a broadly flat earnings result from the prior corresponding period. Nonethless, the broker has placed a $35 price target on the shares – on the expectation that NAB has room for further costs savings and interest margin upside. Despite the broker’s positive outlook, I believe the shares look fully valued and would be cautious buying at current levels.

RCG Corporation Ltd (ASX: RCG)

The RCG share price has been smashed over the past few months but Bell Potter believes the stock is well oversold and has set a 12-month price target of $1.70. The broker remains positive on the footwear company after Skechers USA Inc. reported strong third quarter sales in the US and made positive commentary relating to its international businesses including Australia. I tend to agree with Bell Potter that the shares are undervalued, although I think the market is likely to remain cautious until the company reports its full year results in August. The shares last traded at 91 cents.

Challenger Ltd (ASX: CGF)

The Challenger share price has performed exceptionally well over the past couple of years, but Bell Potter thinks there could be further gains to come and has set its 12-month price target to $14.70. It comes after the company released another impressive update last week that showed continued growth from the life annuities division. The broker believes Challenger’s growth is set to accelerate even further and will be supported by the pending launch of AMP Limited (ASX: AMP) and BT Investment Management Ltd (ASX: BTT) annuities on its platforms. With the ageing population acting as a very strong tailwind, I will have to agree with Bell Potter on Challenger and like the shares as a long term ‘buy and hold’.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of National Australia Bank Limited. Motley Fool contributor Christopher Georges owns shares of BT Investment Management Limited and RCG Limited. The Motley Fool Australia owns shares of Challenger Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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