Risk appetite is making a comeback after the last brutal two days with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index gaining stream during lunch time trade.
The top 200 stock benchmark jumped 0.7% as investors returned to hunt out bargains, even though I don’t believe the market had fallen far enough to really excite value buyers.
But this doesn’t mean that there aren’t well-priced stocks that are well placed to outperform in a market recovery and those looking for clues on where these opportunities might want to pay heed to the latest recommendation upgrades by leading brokers.
The forgotten gold price beneficiary
One such stock is the ALS Ltd (ASX: ALQ) share price, which rallied 3.2% to $7.03 at the time of writing.
The laboratory services group benefited from an upgrade by Citigroup to “buy” from “neutral” as it’s well placed to benefit from the surging gold price.
“ALS’ 1H guidance points to weaker than expected trends in Geochem and we continue to see near term risk to Commodities earnings,” said Citi which has a $7.90 price target on the stock.
“However, we see upside risk to our FY21e forecasts as we see potential for the stronger gold price to result in increased exploration spending in the future given stronger cash flows for the gold producers and increased investor confidence in the sector.”
Get it while its hot
Another stock that is tipped to regain favour with investors is the Domino’s Pizza Enterprises Ltd. (ASX: DMP) share price
The fast food franchisor jumped 1% to $37.21 after UBS upped its recommendation on the stock to “buy” from “neutral” as it believes the earnings risks is more than priced into the stock after it underperformed the ASX 200 by around 18% in the last three months.
While Domino’s is still vulnerable to issuing weak earnings numbers this month, UBS is comforted by the fact that consensus forecasts are low and the stock’s current valuation doesn’t adequately reflect the strong growth opportunity from accelerating store openings in Germany, a greater focus on costs in its Japanese operations and improved efficiencies across the group.
UBS also points out that the DMP share price is trading on around a 17% to 28% discount to its international peers even though the ASX-listed stock has a brighter growth trajectory than most in the group.
The broker has a 12-month price target of $48.50 per share.
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The Motley Fool Australia has recommended Domino's Pizza Enterprises 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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