Leading broker rates these 4 shares as top buys

If this broker is right, there is a huge level of upside for investors buying these four shares.

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Although broker recommendations should generally be taken with a grain of salt, they can still be a great source of stock ideas that might be worthy of further investigation.

With that in mind, here are four shares that Bell Potter has recently reviewed and believes are seriously undervalued:

Challenger Ltd (ASX: CGF)

Bell Potter has upgraded Challenger's 12-month price target to $11.90 on the back of yesterday's positive September quarterly update. The company continues to benefit from exceptionally strong annuity sales and the broker expects this momentum to continue as Challenger broadens its distribution network through an increasing number of investment platforms.

Perpetual Limited (ASX: PPT)

Following the release of Perpetual's first quarter update that showed a 4.4% increase in funds under management (FUM) last week, Bell Potter has revised its 12-month price target to $54.60. Although the broker believes Perpetual is well placed to benefit from rising markets, I would personally prefer a fund manager with a more consistent track record such as Magellan Financial Group Ltd (ASX: MFG) or BT Investment Management Ltd (ASX: BTT) Interestingly, the broker has also recently upgraded BT's 12-month price target to $13.00, after it also released a better-than-expected FUM update.

Empired Ltd (ASX: EPD)

Bell Potter recently upgraded the IT services company to a buy and set a 12-month price target of 65 cents. The broker believes the company is back on track to reverse its disappointing FY16 result and could also be a possible takeover target. Although I wouldn't buy shares in hope of a takeover, I think the current share price of 47.5 cents could offer good value if Empired is able to deliver a strong first half FY17 result.

Money3 Corporation Limited (ASX: MNY)

The broker recently initiated coverage on the consumer lending company with a buy rating and a 12-month price target of $2.40. Unlike other consumer finance providers, Money3 focuses on medium-sized loans and car financing and this has proven to be quite a successful and sustainable business model. The shares are currently trading on a trailing price-to-earnings ratio of just over 12, which appears quite attractive considering Money3 is expected to deliver earnings per share (EPS) growth of around 20% in FY17.

Motley Fool contributor Christopher Georges owns shares of BT Investment Management Limited. 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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