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Leading brokers name 3 ASX shares to sell

On Tuesday I looked at a few shares which had found favour with brokers this week and been given buy ratings.

Today I thought I would look at the shares that are out of favour with brokers and have been rated as sells. Three that caught my eye are listed below:

Harvey Norman Holdings Limited (ASX: HVN)

According to a note out of Citi, it has retained its sell rating and $3.10 price target on Harvey Norman after one of its furniture industry rivals announced a significant drop in sales in Australia. South African retailer Steinhoff revealed a 9% decline in Australian same store sales in its latest quarterly update. While Steinhoff is not necessarily at the top of its game here, the broker still sees this as a reason to be concerned. I agree with Citi on this one and would stay well clear of Harvey Norman right now.

Magellan Financial Group Ltd (ASX: MFG)

Analysts at Morgan Stanley have downgraded the fund manager’s shares to an underweight rating with a $27.00 price target. The broker made the move on the back of concerns over a slowdown in retail funds flows. The broker has suggested that there is a risk of inflows turning negative in the near future after months of slowing. Furthermore, as Magellan’s fees are generally higher than its peers, it may have to cut them in order to compete for inflows. If this proves accurate then I think Morgan Stanley’s underweight rating would be appropriate.

Sigma Healthcare Ltd (ASX: SIG)

Another note out of Morgan Stanley reveals that its analysts have retained their underweight rating on this pharmacy chain operator and distributor and slashed the price target on its shares to 43 cents. This comes after Sigma confirmed that Chemist Warehouse will not renew its contract when it ends next year. The broker estimates that this contract currently contributes approximately 41% of its total revenue, making it a hard void to fill. Given the challenges that Sigma faces, it is well and truly on my avoid list right now despite its sharp decline.

Those shares may be rated as sells, but these top shares are buy rated right now. Do you own them?

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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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