Top brokers name 3 ASX shares to sell

Yesterday I looked at three shares that have found favour with brokers this week and been given the much-coveted buy rating.

Unfortunately, not all shares are in favour with brokers. Three which have fallen out of favour and been given the unwanted sell rating are listed below.

Here’s why brokers think investors should avoid them:

Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)

According to a note out of Citi, its analysts have downgraded this sleep treatment company’s shares to a sell rating from neutral with a reduced price target of NZ$12.50 (A$11.46). A new analyst is covering the company and appears concerned with its valuation. The new analyst expects earnings per share of 35.1 cents in FY 2019 and 39.8 cents in FY 2020. This means its shares are changing hands at around 40x forward earnings. I think Citi is spot on with this assessment and would suggest investors consider locking in some profits after its strong 12-month share price gain.

Inghams Group Ltd (ASX: ING)

Analysts at UBS have downgraded this poultry company’s shares to a sell rating from neutral and cut their price target down to $3.40. According to the note, the broker made the move on the belief that the market is expecting too much from Inghams in respect to cost reductions and its ability to pass on costs. Furthermore, it has revised its earnings forecasts lower through to FY 2021. While I may not be a seller of its shares if I owned them, I’d only be a buyer if they dropped down to a more attractive level.

Sims Metal Management Ltd (ASX: SGM)

Another note out of UBS reveals that its analysts have retained their sell rating and $13.70 price target on this scrap metals company’s shares. According to the note, China could be on the verge of placing a complete ban on all scrap metal imports. While the broker acknowledges that Sims Metal Management is unlikely to be impacted greatly in the current half, it could start to feel the pinch over the long-term if China follows through on this speculation. While it might be a little soon to panic, I think this is something for shareholders to keep a close eye on. And considering the company’s shares have rallied strongly since October, it might be worth taking a little bit of profit off the table.

While those may be the shares to sell, these are certainly the ones to buy in my opinion.

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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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