The ASX is rallying after investors found a spring in their step as they brushed aside trade tensions between the US and China.
The threat of a full blown trade war between the world's two biggest economies have rattled global market but ASX bulls won't be letting that get in their way with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index jumping 0.3% to 6,291.
But I believe the path of least resistant is down and we should brace for a possible pull-back in the market in the near-term which could last several weeks.
If you are wondering which stocks in your portfolio to ditch in anticipation of the turmoil, there are three that top brokers have just downgraded to "sell".
Lost its fizz
The first to get the chop is Coca-Cola Amatil Ltd (ASX: CCL) after Macquarie Group Ltd (ASX: MQG) downgraded the stock to "underperform" from "neutral" following the recent CCL share price bounce.
"CCL's share price is up ~8% CYTD (vs. ASX 200 at ~11%). Its PE multiple has expanded ~1.2ppts during this period (trading on ~17x PE) and it is trading at a 10% premium to the market. With limited EPS changes, we believe the re-rate is due to the Australian bond yield touching all-time lows and investor's search for relatively defensive yield," said Macquarie.
"On an EV/EBITDA basis, at ~9x, CCL is trading in-line with some global peers, despite its weaker earnings outlook. Further PE multiple re-rating is unlikely, in our opinion, and we struggle to find upside risk to EPS."
The broker has a 12-month price target of $8.15 per share.
Leveraged to a downturn
Building materials group CSR Limited (ASX: CSR) is another to put on your sell list, according to Credit Suisse, which downgraded the stock to "underperform" from "neutral" after the company posted its profit results (click here to read more about it https://www.fool.com.au/2019/05/08/csr-share-price-sinks-as-it-unveils-a-big-profit-hit/).
While the downturn in residential construction doesn't seem to have impacted on CSR for now, the broker thinks this is only a matter of time.
"Of more contention is the level of operating leverage to expect. The company talked about a high level of variable costs and margin resilience," said Credit Suisse.
"For a guide, we look to the past five years, where EBIT has increased at 1.7-1.8x revenue; with this as a guide, we model 1.5x leverage adjusted for offsets such as low margin imports."
Credit Suisse has a price target of $2.90 per share.
All shopped out
Finally, Myer Holdings Ltd (ASX: MYR) got cut to "sell" from "neutral" from UBS as the broker believes the Myer share price has run ahead of fundamentals.
Investors have gotten excited about the department store's upside from handing back expensive leases, which have been a major headache for the group.
While UBS thinks Myer's earnings per share can be bolstered by 10% to 33%, the upgrade doesn't justify the 64% surge in Myer's share price since March this year.
"Our analysis of leases found 15 additional stores have lease expiries to FY25, with scope to hand back ~16 floors (~90ksqm or ~10% space) over the next 3-4yrs. We estimate this to be a ~$18m saving by FY23 (~$21m including head office)," said UBS.
"However, even including this, cost-out and GM benefit (shrink, mix), we believe risks remain andthat the market is assuming a $25m near-term EBIT uplift vs. consensus, an overly optimistic figure with risk of disappointment."
UBS has a 59 cents per share price target on Myer.
