On Wednesday I looked at three shares that are currently in favour with brokers and been given the much-coveted buy rating.
Today I thought I would look at the unfortunate shares which are out of favour and been given sell ratings by brokers. Two that caught my eye are listed below:
National Australia Bank Ltd (ASX: NAB)
According to a note out of Morgan Stanley, it has retained its underweight rating and $26.40 price target on the banking giant’s shares after it introduced a new and simplified executive remuneration framework. Morgan Stanley believes that this new framework is a sign that the banks will need to focus a lot of their energy on culture and conduct. As a result, it suspects that National Australia Bank could have to accept a reduction in its profitability in exchange for winning over customers. The broker continues to expect a 10% dividend cut to 178 cents per share by the bank in FY 2019. I think that Morgan Stanley makes some fair points here. And while I agree with its view on National Australia Bank, I think other banks are better placed and good investment options.
Synlait Milk Ltd (ASX: SM1)
A note out of Credit Suisse reveals that it has retained its underperform rating but raised the price target on the dairy processor’s shares slightly to NZ$7.65 (A$7.00) following the release of its full year results on Wednesday. Synlait Milk posted an impressive 89% year-on-year increase in profit to NZ$74.6 million thanks to the strong demand for infant formula products it supplies for the likes of A2 Milk Company Ltd (ASX: A2M) and Akara. While the broker found a lot to like in its results release, it doesn’t appear keen on its valuation given the expected slowdown in sales volume growth. I would have to agree with Credit Suisse on Synlait Milk. I thought its result was top notch, but I wouldn’t be a buyer of its shares unless there was a meaningful pullback.
But I would be a buyer of this share today. I think it is great value and one to snap up before it is too late.
Scott Phillips has stumbled upon a little-owned stock he believes could be one of the greatest discoveries of his 25 years as a professional investor.
This is your chance to get in early on of what could prove to be a very special investment recommendation. Think about how many investing trends you've missed out on, even though you knew they were going to be big. Don't let that happen again. This is your chance to get in early.
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk and National Australia Bank Limited. 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.