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Top brokers name 3 ASX shares to sell

On Wednesday I looked at three shares that were lucky enough to have been given buy ratings by brokers this week.

Today I thought I would look at the unlucky shares that have been given the unwanted sell rating.

Three that caught my eye are listed below. Here’s why they have been rated as sells:

Commonwealth Bank of Australia (ASX: CBA)

According to a note out of Morgan Stanley, it has retained its underperform rating and cut the price target on the banking giant’s shares from $70.00 to $64.00. While the broker has slapped sell ratings on almost all Australian banks due to concerns that the bank super cycle has come to an end, Commonwealth Bank is bottom of its list when it comes to the majors. As well as being hit by the end of the super cycle, the broker pointed to the bank’s lack of earnings growth and its falling return on equity. As I said earlier this week, I don’t agree that Commonwealth Bank is a sell at this level. However, it wouldn’t be my first pick in the sector.

Santos Ltd (ASX: STO)

A note out of UBS reveals that it has downgraded this leading energy producer’s shares to a sell rating with a reduced price target of $5.45. Although UBS has upgraded its oil price forecasts for the year ahead, it feels that Santos’ shares have already priced in a high oil price. Meaning the oil price would have to rise meaningfully from here to offer any upside. The broker has suggested that investors look at Woodside Petroleum Limited (ASX: WPL) instead of Santos. I think UBS makes some valid points, however I wouldn’t be a seller at this price. But I’d probably not be a buyer unless its share price was 5% to 10% lower.

Sims Metal Management Ltd (ASX: SGM)

Analysts at Credit Suisse have retained their underperform rating and $14.50 price target on this global metals and electronics recycling company. According to the note, although there have been positive developments such as China lifting its one-month U.S. scrap inspection ban, the broker hasn’t seen enough to make a change to its recommendation. At 17x estimated full-year earnings I think Sims Metal Management’s shares are about fair value, so I wouldn’t be in a rush to hit the sell button just yet.

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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 Scott Phillips.

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