On Monday I looked at three shares that had found favour with brokers this week and were given buy ratings.
Not all shares are in favour, though. Three which have been given the dreaded sell rating are listed below. Here’s why brokers think they should be avoided:
Medibank Private Ltd (ASX: MPL)
According to a note out of Morgan Stanley, it has retained its underweight rating and $2.40 price target on this private health insurer’s shares. Although Medibank Private’s FY 2018 result was in line with expectations, the broker doesn’t appear to be overly positive on its prospects in FY 2019. Morgan Stanley doesn’t expect there to be any notable improvements in its margins from softer claims and has pointed to next year’s election as being a risk. I completely agree with Morgan Stanley on this one and believe the PHI industry could be a key election topic and at risk of being heavily regulated.
Netwealth Group Ltd (ASX: NWL)
Analysts at UBS have retained their sell rating and $7.00 price target on this fintech company’s shares following the release of its full year results. Although Netwealth delivered a result ahead of its prospectus guidance, its guidance for the year ahead appears to have the market and UBS concerned. Management expects pricing competition to continue in FY 2019 and weigh on its margins. I would agree with the broker on this one as well and suggest investors stay clear of the company for the time being.
Reliance Worldwide Corporation Ltd (ASX: RWC)
A note out of Deutsche Bank reveals that its analysts have downgraded this plumbing parts company’s shares to a sell rating with a price target of $4.80 after its FY 2018 results fell short of expectations. Deutsche has voiced concerns over the growth prospects of its underlying U.S. business outside the recent acquisition of the John Guest business. As a result, it doesn’t believe there’s a good enough risk/reward on offer at these levels. While I wouldn’t necessarily be a seller of its shares if I owned them, I wouldn’t be a buyer unless they dropped to a more attractive level.
While those shares may be the ones to sell, these buy rated blue chip shares are the ones to snap up 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.