The S&P/ASX 200 Index (Index:^AXJO) slipped into negative territory on Tuesday but longer-term investors should regard any dip in the market as a buying opportunity.
The market was up by more than 2% this morning but it couldn’t sustain the rise and finished the day 0.7% in the red.
I don’t think there’s anything sinister in the fall. The top 200 benchmark bounced by around 15% since the bear market trough last month and it won’t be a straight-line recovery.
Top brokers released their latest buy recommendations for those looking to use the weakness as a chance to pick up some well-priced shares.
Logistics company Qube Holdings Ltd (ASX: QUB) is one that Goldman Sachs is recommending as a “buy” even though management recently withdrew its guidance.
The uncertainty created by the COVID-19 fallout is making it hard for most ASX companies to forecast what may lie ahead, but this doesn’t worry the broker.
“While the business is substantially exposed to potential weakness in trade and container volumes, we believe the 34% decline in the stock price since January (inclusive of the Covid-19 outbreak impact) is excessive,” said Goldman Sachs.
The market is failing to appreciate two key things about Qube. One is the defensive nature of the group’s near-term earnings. Further, the valuation of its uniquely positioned Moorebank facility will get a boost in this persistent low-yield environment.
Goldman’s 12-month price target on Qube is $2.91 a share.
Premiums on the rise
Another stock that may have slumped too far is the QBE Insurance Group Ltd (ASX: QBE) share price, according to Citigroup.
While the global coronavirus pandemic presents plenty of uncertainty for the insurer, the broker thinks too much bad news is in the price and is reiterating its “buy” recommendation on the stock.
One reason for Citi’s optimism is its belief that insurance premium price increases could rise further.
“However, volumes are likely to drop off,” said Citi. “There will be areas no longer desirable to write e.g. certain parts of trade credit, business insolvencies and pressure on corporate budgets more generally.”
The broker cut is price target on QBE to $10.40 from $16.70 a share, but that still leaves around a 20% upside for the stock if you included dividends.
A defensive buy
AUB is cutting costs to help it cope with the COVID-19 fallout and the broker believes its business will be less impacted than most from the pandemic.
“Multi-sector exposure and diversified broker network is defensive in the current uncertain environment,” said Macquarie.
The broker’s 12-month price target on the stock is $11.35 a share.
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Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group 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.