The S&P/ASX 200 Index (Index:^AXJO) is likely to trade water in the near term as bargain buys are getting increasingly hard to find after the market bounce.
Investors are sitting on their hands as they await greater clarity on the impact of COVID-19 on company earnings.
But there are a number of overlooked value stocks on the market, according to some of our leading brokers who have just upgraded these ASX shares to "buy".
Even bad news has a price
One stock that is now looking attractive is Australian Pharmaceutical Industries Ltd (ASX: API), according to Citigroup.
This is despite the health and beauty group posting a disappointing first half result yesterday.
What's more, the period covered doesn't include the coronavirus impact, but yet its Priceline, ClearSkin and Consumer Brands businesses delivered earnings that were below what the broker was expecting.
But there's too much bad news now factored into the API share price after its 22% plunge since the start of the year.
This was enough to convince Citi to upgrade the stock to "buy" from "neutral" even as the broker cut its price target to $1.15 from $1.40 a share.
Positioned for further gains
Another stock that just got put on the upgraded list is McPherson's Ltd (ASX: MCP). Shaw and Partners lifted its rating on the beauty and household products supplier to "buy" after management's recent trading update.
"The company has re-iterated guidance (which could be conservative), paid an interim dividend, has a strong balance sheet and multiple products/segments growing. A strong position to be in," said Shaw.
"MCP is trading at a discount of 33% to HW&B peers with above market growth and a conservative balance sheet.
"Re-iteration of guidance and acceleration leading into FY21 bodes positively for a continued re-rating and we see potential for M&A to augment this earnings stream in the near term as MCP can act opportunistically."
The broker's price target on McPherson's is $3.12 a share.
Engineered for value
Meanwhile, Goldman Sachs believes listed engineering contractors leveraged to the mining industry will outperform in this coronavirus-hit market.
"We continue to recommend investors target production exposure within mining services, with quarterlies reaffirming miner intentions to maintain healthy output in the current backdrop," said the broker.
The stock in this sector that got promoted to a "buy" is Australia's largest mining equipment rental firm Emeco Holdings Limited (ASX: EHL).
The broker's price target on Emeco is $1.30 a share.
