Leading brokers name 3 ASX shares to sell

Even prior to today’s market meltdown brokers had been reaching for the sell button on a number of popular ASX shares.

Three in particular which caught my eye are listed below. Here’s why brokers rate them as sells:

Computershare Limited (ASX: CPU)

According to a note out of Morgan Stanley, its analysts have retained their underweight rating on the share registry company. And while the broker has lifted the price target on its shares to $13.00, this is still approximately 20% lower than the current share price. Analysts at the investment bank believe that investors are overlooking the underlying structural challenges the company faces and the reinvestment required to combat revenue compression. While I’m not as bearish on Computershare as Morgan Stanley is, I wouldn’t be a buyer of its shares unless they were to pull back below $14.00. At that level I feel they would represent value for money and provide a better risk/reward.

Healthscope Ltd (ASX: HSO)

Morgan Stanley also has an underweight rating on this private hospital operator and a $1.70 price target on its shares. The broker’s research indicates that volume trends have remained weak in the first-half and are unlikely to recover until private health insurance affordability improves. The broker also has concerns over the company’s Northern Beaches Hospital in Sydney which is expected to open in late 2018. I would agree with Morgan Stanley on this one as well. I think Healthscope could be a poor performer during earnings season and one to avoid.

Wesfarmers Ltd (ASX: WES)

A note out of Citi reveals that its analysts have retained their sell rating but cut the price target on the conglomerate’s shares to $39.30 following yesterday’s dismal Bunnings UK update. The $1 billion impairment and $165 million operating loss from the segment in the first-half is worse than Citi expected. As a result, it expects the market to start pricing in an exit of Bunnings UK in the near future. I agree with Citi that Wesfarmers would be best avoided at this stage. The company’s UK expansion is looking like it could be just as disastrous as the Masters misadventure by rival Woolworths Group Ltd (ASX: WOW).

While the shares above may be classed as sells, I think these hot stocks ought to be classed as strong buys. Especially after today's declines.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended Computershare. 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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