The sudden turnaround in the market today underscores the point that investors do not need to chase the rally.
The S&P/ASX 200 Index (Index:^AXJO) (ASX:XJO) surrendered all of its early gains of around 3% to close 2% in the red on Tuesday. This followed yesterday’s stunning 8% rally on the back of the government’s record $130 billion job-keeper stimulus.
Averaging into the market
Investors shouldn’t be put off by the wild market swings. The volatility won’t die down till fears of the COVID-19 pandemic eases.
But times of market weakness should be regarded as an opportunity to average into the market. This means not buying in one go but breaking up your order over different price points.
Those looking to put their capital back to work and looking for buy ideas might want to start with stocks that just got upgraded by leading brokers.
Well placed in the pandemic
One ASX stock that just got lifted to “outperform” from “neutral” by Credit Suisse is Ansell Limited (ASX: ANN).
The broker changed to a more bullish recommendation on the glove maker after the company issued a reassuring update on Monday.
“Amidst COVID-19, ANN is seeing strong demand in its Healthcare Single Use gloves, Surgical gloves, and chemical protection brand,” said Credit Suisse.
“We estimate these brands account for up to ~45% of group sales and are likely to offset the weakness in Industrial end user demand and general economic weakness.”
What’s more, the collapse in the oil price will lower costs of petrochemical materials used by Ansell. The broker’s price target on the stock is $32 a share.
Deep in the money
The market is currently valuing the invested capital of Crown (excluding Melco) at 0.7 times, which is half of the average multiple.
“The market has clearly discounted the longer term outlook for the company; including the land/property assets and the casino licences (with average tenure of over 50 years),” said UBS.
The broker also believes Crown’s balance sheet is strong enough to weather the ongoing shutdown of its casinos due to the virus outbreak, and upgraded the stock to “buy” from “neutral” with a price target of $9.15 a share.
Moving in the right direction
Logistics group Brambles Limited (ASX: BXB) is another worth putting on your watchlist, according to Morgan Stanley which upgraded its rating on the stock to “overweight” from “neutral”.
“BXB isn’t immune to COVID19-driven disruption. However, BXB derives 85% of revenues from staples, allowing it to participate in the ‘supermarket surge’ evident across key markets,” said the broker.
Other reasons why Morgan Stanley likes Brambles is for its leverage to the weak Australian dollar, largely defensive end markets and the group’s ongoing share buyback.
The broker’s price target on Brambles is $13 a share.
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Motley Fool contributor Brendon Lau owns shares of Ansell Limited. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. The Motley Fool Australia has recommended Ansell Ltd. 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.