Latest ASX small cap buy calls from top brokers

Buyers might soon be flooding back into the market and these ASX small cap stocks could be major beneficiaries as they are the latest “buy” calls from brokers.

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Buyers might soon be flooding back into the market and these ASX small cap stocks could be major beneficiaries as they are the latest “buy” calls from brokers.

The highly anticipated market sell-off from the US presidential election didn’t materialise despite the worst-case scenario playing out.

Market watchers warned that unless we got a clear winner, Wall Street could tank and take the S&P/ASX 200 Index (Index:^AXJO) down with it.

Why ASX small caps look like good “buys” now

It’s 48 hours since the election and we won’t know who’s the next US president for at least another day. Adding to the uncertainty, Trump also launched legal proceedings to challenge the results.

But investors are taking all of this in their stride with equity markets rallying despite the less than predictable outcome.

Small caps could benefit more from this tailwind as high-risk investments outperform when fear gives way to greed.

In the overtaking lane

Following this train of thought, the Eagers Automotive Ltd (ASX: APE) share price is one to watch. The auto dealer announced two new property deals and UBS took the opportunity to repeat its “buy” recommendation on the stock.

Eagers bought three sites in Western Australia for $30.3 million and a 43,000m2 strategic site in New South Wales from Charter Hall Group (ASX: CHC).

“The deals provide an immediate ~$8m PBT benefit (+4% vs FY21E) on lower occupancy costs, strengthen APE’s tangible asset base and provide significant optionality for APE to reconfigure existing franchises,” said UBS.

“APE remains highly leveraged to current robust trading conditions and we see further opportunities for upside across its business.”

The broker’s 12-month price target on the stock is $13 a share.

Key ASX small cap buy recommendation

Meanwhile, Morgans reiterated its “add” recommendation on the Nanosonics Ltd. (ASX: NAN) share price today following its trading update.

Management reported that consumables volumes and sales growth for its disinfection devices were returning to pre-COVID‐19 levels.

“This is an upgrade on previous commentary provided by management at the release of its FY20 results last August,” said Morgans.

“The key catalyst is the commercial launch of the new product which management are expecting in FY22.

“We recommend clients buy this quality growth stock.”

The broker’s 12-month price target on the NAN share price is $6.86 a share.

Attractive valuation drives upgrade

Finally, the Imdex Limited (ASX: IMD) share price jumped 3.7% to $1.26 ahead of the market close today after Bell Potter upgraded the stock to “buy” from “hold”.

The upgrade comes as the mining services company’s share price declined around 17% over the past three weeks despite an improving outlook.

The broker noted that capital raisings by junior explorers was strong, which should drive demand for Imdex’s drilling services.

Investors may have been disappointed by the delay in Imdex commercialising four new technologies, but this is more than reflected in the depressed stock.

“The steady recovery since Apr’20 and the strength of the tools business demonstrates the quality of IMD’s business, which should benefit from cyclical tailwinds,” said Bell Potter.

“Strength in capital raisings, as well as gold and copper prices indicate a very strong FY22e outlook.”

The broker’s 12-month price target is $1.45 a share.

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Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Nanosonics Limited. The Motley Fool Australia has recommended Nanosonics 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.

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