Bulls are again retreating with their tails between their legs with the S&P/ASX 200 Index (Index:^AXJO) (ASX:XJO) crashing by a whopping 6% plus during lunch time trade.
The economic pain from the global shutdown to contain the COVID-19 pandemic is intensifying with growing worries about insolvencies and widespread job losses.
The market hasn’t looked this cheap in a long time, although few investors will be brave enough to be the first to take the plunge!
But there are three ASX shares that are starting to look like compelling value, according to leading brokers. Those gung-ho enough to live by the mantra “to the brave goes the spoils” might want to keep these stocks on their watchlist.
The Sims Ltd (ASX: SGM) share price crashed below even the depths it reached during the GFC, but the silver lining is that the stock now looks too cheap to ignore, according to Credit Suisse.
The broker upgraded the stock to “outperform” from “neutral” after shares in the scrap metal supplier nearly halved since the start of this calendar year.
Management withdrew its guidance and Credit Suisse noted that having conviction on earnings forecasts for the group is difficult even without the COVID-19 outbreak.
“That said, we do not expect COVID-19 to have an enduring impact, and view the current share price as offering value on a 12- month forward view,” said the broker.
Credit Suisse pointed out a few positives for the stock too, including Sim’s strong balance sheet, benefits from its cost-out program and the early recovery in China, which should spur non-ferrous buying.
Sims share price tumbled 10.3% to $5.47 in late afternoon trade. Credit Suisse’s price target on the stock is $9.10 a share.
Another stock that’s looking cheap after management withdrew its earnings guidance is the Sonic Healthcare Limited (ASX: SHL) share price. Shares in the medical laboratory testing company shed 30% since the February sell-off but most brokers are sticking to their “buy” call on the stock.
Investors are worried that the focus on COVID-19 patients will lead to a sharp drop in demand for testing for patients with other medical issues. But JP Morgan is confident that things will bounce back for the group has an reiterated its “overweight” rating on the stock.
“With Sonic almost certain to emerge from the current period of extreme uncertainty with its market leading lab business intact we believe the weakness provides an opportunity,” said the broker.
JP Morgan’s price target is $28.50 a share.
In the overtaking lane
Another stock to put on your buy-list during the crisis is Carsales.Com Ltd (ASX: CAR). It is a surprising pick given that large discretionary purchases are out of favour in this climate, but Morgan Stanley thinks there’s more than meets the eye for the stock.
While the COVID-19 recovery remains uncertain, the broker noted that the online auto classifieds business in South Korea and Brazil has not slowed despite the virus outbreak. The company’s balance sheet also remains strong.
While Carsales’ Australian business is likely to take a hit from the coronavirus, Morgan Stanley thinks too much bad news is reflected in the share price and its sticking to its “overweight” recommendation on the stock.
The broker’s price target on Carsales is $17.25 a share.
Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.
One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…
Another is a diversified conglomerate trading over 40% off its high, all while offering a fully franked dividend yield over 3%...
Plus 3 more cheap bets that could position you to profit over the next 12 months!
See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.
Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited and Sonic Healthcare 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.