Following on from yesterday's broker upgrades, today I have decided to take a look at which unfortunate shares have fallen out of favour with brokers.
Whilst there have been a number of downgrades this week, these three in particular stood out. Here's what the brokers are saying:
Harvey Norman Holdings Limited (ASX: HVN)
Analysts from the equities desk at Macquarie have slapped an underperform rating on this leading retailer following the release of its half-year results. Although its analysts felt the first-half was strong, they think margins are at cyclical highs and expect them to begin to normalise moving forward. I would have to agree with Macquarie's view that its shares will underperform over the next 12 months, especially as like-for-like sales growth does appear to be slowing. In my opinion there are far better investment options to consider in the retail industry.
QBE Insurance Group Ltd (ASX: QBE)
A research note out of Credit Suisse reveals that its analysts have also downgraded QBE's shares to an underperform rating. According to the release Credit Suisse believes that the main drivers of its strong full-year result were one-offs. Furthermore, its analysts don't appear too confident that the insurance giant will deliver on its FY 2017 guidance. Whilst I'm not as negative on QBE's outlook as Credit Suisse, I still feel that Suncorp Group Ltd (ASX: SUN) offers investors better value for money and would choose it ahead of QBE.
Spotless Group Holdings Ltd (ASX: SPO)
Unsurprisingly after its disastrous half-year result Spotless has been downgraded to a sell rating by analysts at Deutsche Bank. The research note reveals that the first-half result was far weaker than the investment bank had expected. A further concern is its high levels of debt. I completely agree with Deutsche on this one and think investors should avoid Spotless no matter how cheap it appears. The company's balance sheet is not in great health and I wouldn't be surprised to see a capital raising within the next 12 months.
