The market is on track to record its third consecutive trading day of gains and is up 18% since the start of 2019. At this rate, the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index will be hitting new record highs before the end of the financial year in a little more than a week!
Investors are counting on central banks to cut interest rates and use unconventional monetary policy to keep reflate sagging economic growth while there’s also optimism that the US and China will reset trade relations when their leaders meet in Japan next Friday for the G20 meeting.
It’s hard not to be in a buying sort of mood when risk appetite is this strong. I for one am forcing myself to sit on my hands and not allocate more capital to equities, but those who are underweight on this asset class (or who are just plain bullish) might want to consider these three ASX shares which are the latest to score a “buy” recommendation by top brokers.
Weakest link is getting stronger
One hot favourite of brokers is the Link Administration Holdings Ltd (ASX: LNK) share price, although you wouldn’t have thought given the collapse in the stock a few weeks ago when it issued a profit warning due to Brexit and the introduction of the Australian government’s Protecting Your Super (PYS) initiatives.
But the share market services group has convinced UBS to keep backing the stock with a “buy” recommendation following its Investor Day presentation yesterday.
“While LNK is addressing issues in UK Corporate Markets, we continue to see FY20E as a transitional year, especially given Brexit and PYS overhangs through 1H20E,” said UBS which has a $7.75 per share 12-month price target on Link.
“However, medium term growth prospects remain sound in our view, supporting double-digit outer year EPS growth and value upside to LNK’s 15x PE.”
Other brokers including JP Morgan and Credit Suisse have also reiterated their buy-equivalent rating on the stock post the Investor Day.
Not just hot gas
Another underperformer that’s worth looking at is the Origin Energy Ltd (ASX: ORG) share price. While the stock is up 2.6% at $7.22 during lunch time trade, it’s down close to 10% for the month as moves by the federal and state governments to interfere with the price of power is dragging on sentiment.
Origin estimates that the impact from the Victorian state government’s Victorian Default Offer (VDO) plan to lower the cost of power bills and the federal government’s Default Market Offer (DMO), which will kick in on July 1, will cut around $110 million from its business.
But Macquarie Group Ltd (ASX: MQG) believes its APLNG joint venture will be the saving grace and it has kept its “outperform” recommendation on the stock with a $9.12 price target.
“Near-term, ORG is benefiting from APLNG’s strong performance and better Eraring production leading to a quickly de-gearing balance sheet,” said the broker.
“This improves the likelihood of dividend normalisation in FY20 (75% payout ratio), and possibly raises the scope for a surprise in 2H19.”
The Jumbo winning ticket
Finally, the Jumbo Interactive Ltd (ASX: JIN) share price could enjoy further upside thanks to iPhone maker Apple Inc.
It isn’t often that Apple does any favours for anyone other than itself but changes to its App Store guidelines may prove to be a winning ticket for the ASX online lottery company, according to Morgan Stanley.
The broker pointed out that Jumbo is compliant to the new rule, which would bar gaming apps not specifically designed for iOS.
“However, this change affects most (if not all) US State lottery apps which are non-compliant, and note three months is not a lot of time to redevelop a new app, test and prove stability, in our view,” said the broker.
Morgan Stanley has an “overweight” rating on the stock with a price target of $20 a share but this could go up to $35 a pop if Jumbo wins greater market share of the US lottery market due to the App Store changes.
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Brendon Lau owns shares of Macquarie Group Limited. Connect with him on Twitter @brenlau.
The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Jumbo Interactive Limited and Link Administration Holdings Ltd. The Motley Fool Australia has recommended Link Administration Holdings Ltd and Macquarie Group 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.
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