Leading brokers name 3 ASX shares to sell

The Fortescue Metals Group Limited (ASX:FMG) share price is one of three being tipped to sink lower by leading brokers…

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On Thursday I had a quick look at a couple of shares which leading brokers had just given buy ratings to.

Today I thought I would look at the other side of the spectrum, at the shares which brokers think investors should avoid.

Here are three shares that have been given sell ratings or equivalents this week:

Fortescue Metals Group Limited (ASX: FMG)

According to a note out of Morgan Stanley, its analysts have downgraded the iron ore producer to an underweight rating with a $4.50 price target. As well as being cautious on the resources sector as a whole, the broker appears concerned over discounts for iron ore 58% fines. As I'm bearish on iron ore moving forward, I would have to side with Morgan Stanley on this one. However, when the iron ore price finds a bottom, I think Fortescue could be worth a look again.

Nufarm Limited (ASX: NUF)

Following the release of its full-year results earlier this week, Deutsche Bank retained its sell rating and reduced the price target on the crop protection and seed technology company's shares to $6.75. Deutsche appears to have been disappointed with the company's performance in FY 2017 and remains concerned about the challenges its seed business faces in FY 2018. While I think Deutsche price target is overly bearish, I wouldn't be a buyer at the current share price and would class it as a hold.

Western Areas Ltd (ASX: WSA)

A note out of Goldman Sachs this week reveals that the broker has downgraded the nickel producer's shares to a sell rating with a $2.00 price target. According to the note, the broker believes that its shares are overvalued and that it needs a nickel price of closer to US$5.50/lb to justify the current share price. According to the LME, the spot nickel price is currently US$4.61/lb, well short of Goldman's target. While I think the new low-cost Western Areas is an attractive option, I would like to see improvements in nickel prices before making an investment.

Motley Fool contributor James Mickleboro has no position in any of the 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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