Brokers name 3 ASX shares they rate as sells

When investing it is always nice to know the market shares your sentiment about a particular company. If the market is bullish about a share it can carry it higher. Unfortunately, the same can’t be said for when the market is bearish about a share.

One of the last things you want to hear as an investor is a broker downgrading a share you own to a sell rating. According to the brokerage arm of Commonwealth Bank of Australia (ASX: CBA), there were three notable consensus downgrades recently.

This could spell trouble in the months ahead for shareholders of the following three shares:

Adelaide Brighton Ltd. (ASX: ABC)

The shares of building materials supplier and lime producer Adelaide Brighton were downgraded to a moderate sell by brokers last week.

This downgrade is likely to be related to the disappointing outlook in housing construction. Data released by the Australian Bureau of Statistics showed that Australian building approvals dropped 15.5% year over year in January.

Although there was a little bounce in February data released yesterday, the overall trend is still very much downwards. Additionally, the Housing Industry Association has warned that housing construction will fall sharply over the next two years.

If this proves to be the case then it could certainly stifle Adelaide Brighton’s future earnings growth and prevent the share price from climbing much higher.

Pact Group Holdings Ltd (ASX: PGH)

Pact is a supplier of rigid plastic packaging and related products, and its shares were downgraded to a sell by brokers last week.

Pact has been feeling the pinch from the slowdown in New Zealand’s vastly important dairy sector. The company is a supplier of steel drums for anhydrous milk fat. Currently there is an excess of the product in New Zealand and around the world, leading to lower export levels.

Until supply and demand find their equilibrium there is chance that the company may not be able to provide investors with the levels of growth they are expecting.

Virgin Australia Holdings Ltd (ASX: VAH)

It will come as little surprise to investors that Virgin Australia was downgraded to a sell by brokers recently.

Many investors will no doubt be worried over its balance sheet following a recent $425 million loan from its big four shareholders. Virgin Australia’s management advised that the loan will be used to provide it with short-term flexibility, while it undertakes a review of its capital structure.

With AIR N.Z. FPO NZ (ASX: AIZ) reportedly looking to offload its 25.9% stake in the company, there is a lot of uncertainty surrounding its future. For this reason I would stay away from Virgin Australia and invest my money in Qantas Airways Limited (ASX: QAN) if I were looking at investing in an airline.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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