Is there finally light at the end of this COVID-19 tunnel? The coronavirus curve, which measures the rate of new infections, appears to be flattening.
We are certainly not out of the woods yet. I don’t think we will get the V-share recovery that the bulls have been touting (and I would be happy to be wrong here), but it reinforces my belief that the worst of the crisis may be behind us.
This may bring bargain hunters out of the woodwork. If you are searching for buy ideas, here are three from leading brokers.
Building to a buy
Problem-prone Boral Limited (ASX: BLD) is looking good value, according to Credit Suisse. The Boral share price is hit hard by the coronavirus pandemic, which is impacting on demand for its building materials in Australia and the US.
It’s the US that’s a particular concern as the country is still struggling to contain the outbreak. But Credit Suisse believes Boral has a number of redeeming qualities and it’s sticking to its “outperform” recommendation on the stock.
First, construction is deemed an essential activity and demand for its products aren’t only driven by consumers.
“While all segments will experience a drop in volumes due to productivity at least, we expect Boral’s key Infrastructure and Construction segments will experience a less abrupt contraction compared to Repair & Remodel,” said the broker.
“These segments exhibit long completion times and order books of 6-12 months+; thus able to continue without any input from worried consumers.”
Further, Credit Suisse believes Boral can avoid doing a capital raising. Even on the broker’s downgraded forecasts, the group can keep ahead of its debt covenants.
The broker’s 12-month price target on the stock is $3.70 a share.
Burning bright in the gloom
The turmoil caused by the coronavirus and oil price war is taking a big toll on the Santos Ltd (ASX: STO) share price.
I think the energy sector will cop a bigger beating than others from the pandemic, but JP Morgan thinks too much bad news is priced into Santos.
The broker calls Santos its preferred pick for the sector and management is aiming to be breakeven at a low oil price of US$25 a barrel.
“We believe the company is better placed than peers given a reasonable balance sheet, and up to 36% of projected revenue at fixed price domestic sales contracts,” said JP Morgan.
“We estimate that the company is offering a free cash flow yield of more than 20% excluding discretionary capital and 14% including all growth capex.”
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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.