Leading brokers name 3 ASX shares to sell today

On Monday I looked at three shares that had found favour with brokers and been given buy ratings this week.

Today I thought I would look at a few shares that are out of favour and been tipped as the ones to avoid. Here’s why they have been given sell ratings:

Fortescue Metals Group Limited (ASX: FMG)

According to a note out of Deutsche Bank, it has downgraded this iron ore miner’s shares to a sell rating and reduced the price target on them from $5.80 all the way down to $3.70. The broker doesn’t appear optimistic on iron ore prices due to bottlenecks at Chinese blast furnaces. The broker suspects that things could turn sour before the low grade discount has chance to narrow.  I would agree with Deutsche on this one and think investors ought to look elsewhere in the sector.

Primary Health Care Limited (ASX: PRY)

A note out of Credit Suisse reveals that its analysts have retained their underperform rating and $2.95 price target on this healthcare company’s shares despite the planned acquisition of Monserrat Day Hospitals. Although the broker has upgraded its forecasts for this year and next to reflect the acquisition, it isn’t enough to justify a change of recommendation. Credit Suisse feels that its shares are expensive given the short term risks to its earnings. While I think Credit Suisse makes a fair point, I’m not as bearish on Primary Health Care and would class it as hold after this acquisition.

Sigma Healthcare Ltd (ASX: SIG)

Analysts at Morgan Stanley have retained their underweight rating and reduced the price target on Sigma’s shares to 41 cents. The broker has made the move on the back of challenging industry conditions and concerns over the loss of the Chemist Warehouse supply agreement. Its analysts have suggested that earnings per share could fall as low as 2 cents per share in FY 2020 when the agreement ends. While I agree with Morgan Stanley that Sigma is a sell, I feel a price target of around 30 cents would be more appropriate. This would price its shares at 15x estimated FY 2020 earnings, which I feel is fair for its outlook.

While those may be the shares to sell, I think these are the shares to buy this week.

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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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