3 ASX shares the brokers think you should sell

Bellamy’s Australia Ltd (ASX:BAL) is one of three shares which top brokers have picked out as sells at the moment. Here’s why…

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Following on from yesterday’s broker upgrades, I thought that I would take a look at the other side of the coin today – broker downgrades.

Three shares which have fallen foul of brokers in the last few days are as follows:

AWE Limited (ASX: AWE)

A research note out of Macquarie reveals that its analysts have downgraded the energy company from a hold rating to a sell. According to the release Macquarie has lowered its oil and gas forecasts for the year, resulting in a less than favourable outlook for AWE. I’d agree with Macquarie on this and expect increasing shale production in the United States to offset a good portion of OPEC’s production cut. If this happens then the oil glut is likely to remain for longer than expected, holding down oil prices in the process.

Bellamy’s Australia Ltd (ASX: BAL)

Although not strictly a downgrade, analysts at Citi have reiterated their sell rating on Bellamy’s following Reckitt Benckiser’s takeover approach of infant formula giant Mead Johnson. Whilst Bellamy’s might at first glance appear to be an attractive option for an acquisition following the sharp decline in its share price, it’s worth noting that it still trades at 35x estimated FY 2017’s earnings. That strikes me as overly expensive given its struggles. I would follow Citi’s advice and keep away from this one.

Seven West Media Ltd (ASX: SWM)

A research note out of Deutsche Bank reveals that it has downgraded the media company from a hold rating to a sell. Its analysts believe that advertising in the television market is still weak, with no signs of improvement forthcoming. I think Deutsche is spot on with this one. With the likes of Facebook and Google able to offer targeted advertising, I don’t see the appeal in advertising on television anymore.

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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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