The market is flip-flopping between gains and losses as investors are sitting on the fence ahead of a bevy of macroeconomic news.
The S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index slipped 0.2% into the red during lunch time trade after making small gains earlier.
But signs of deescalating trade tensions between the US and China, a clear election victory by the conservatives in the UK and further dovish comments from the US Federal Reserve at their rate meeting this week could trigger the official start of the so-called Santa Rally.
The Santa Rally describes a seasonal phenomenon where share markets run higher in the two weeks before Christmas and into mid-January. It doesn't happen every year, but there is historically a 70% chance of it happening.
If you are looking for stocks best placed to participate in any year-end rally, the latest "buy" recommendations by leading brokers could be a good place to start.
Surfs up
Credit Suisse reinstated its "outperform" recommendation on the Kathmandu Holdings Ltd (ASX: KMD) share price following the adventure gear retailer's acquisition of surf brand Rip Curl.
"We believe Rip Curl is a complementary and broadly aligned brand with the core Kathmandu product offer," said the broker.
"Importantly, we believe the acquisition of Rip Curl is a transformational transaction for KMD, it moves the company from a retail business largely dominated by a single outdoor brand to a genuine multi-brand and multi-channel company."
The takeover also means Kathmandu's earnings growth for FY21 is pretty much a done deal. Given this lacklustre economic environment, investors should be happy to pay for growth.
Credit Suisse's target price on KMD is $3.35 a share.
Bottle half full
The key message from UBS following the big sell-off in the A2 Milk Company Ltd (ASX: A2M) share price yesterday is that there's no point crying over spilt milk.
The stock got hammered by news of the sudden resignation of chief executive Jayne Hrdlicka, who added a lot of value of the stock over the time she was at the helm.
But the departure isn't worrying UBS, which reiterated its "buy" recommendation on A2 Milk with a price target of NZ$17 per share.
"While today's update has increased uncertainty from a management stability perspective, further clarity around profitability targets and no change to the strategy is positive," said UBS.
"The above is coupled with strong cash generation and a long growth run-way."
Leveraged to global growth
One stock with the potential to generate around a 30% total return (capital growth and dividend) in 2020 is Worley Ltd (ASX: WOR), according to the analysts at Macquarie Group Ltd (ASX: MQG).
The broker is feeling bullish towards the oil and gas engineering group due to its global cyclical leverage.
The macroeconomic picture is looking brighter as Macquarie believes the US is headed for a recovery. Further, a bigger than expected cut in oil supply from OPEC is another reason to buy Worley.
Macquarie rates the WOR share price as "outperform" with a 12-month price target of $18.99 per share.
