Brokers just upgraded these two ASX stocks to “buy”

The market is in retreat today but there are two ASX stocks bucking the downtrend after getting upgraded by leading brokers.

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The market is in retreat today but there are two ASX stocks bucking the downtrend after getting upgraded by leading brokers.

The S&P/ASX 200 Index (Index:^AXJO) shed 0.5% ahead of the close with most sectors slumping into the red on weak offshore leads.

Upgraded on attractive valuation

However, the Perpetual Limited (ASX: PPT) share price moved in the opposite direction as it surged 5.5% to $35.91. This makes the wealth manager the second top performer on the ASX 200 after the Aurumin (ASX: AUN) share price.

The Perpetual share price got a boost as Credit Suisse upgraded it to “outperform” from “neutral”.

The broker thinks now is the time to buy the stock. It’s trading on a FY22 forecast price-earnings multiple of 13 times.

Why the Perpetual share price is now a buy

That’s attractive given that the risk of clients leaving Perpetuals recently acquired business Barrow Hanley is reduced.

“Outflows likely to moderate and could shift to neutral/positive with the recent rotation into value, improved fund performance and exposure to higher growth ESG markets,” said the broker.

“[It’s] our view that PPT should trade on ~15x 24‐month EPS, offering investors not only earnings growth but also a re‐rating.”

Credit Suisse’s 12-month price target on the stock is $39 a share.

The ASX stock that got upgraded due to M&A

Meanwhile, the GUD Holdings Limited (ASX: GUD) share price jumped 1.1% to $11.31 on Thursday.

Its outperformance coincides with Macquarie Group Ltd’s (ASX: MQG) decision to upgrade it to “outperform” from “neutral”.

The broker is excited about the stock following GUD’s acquisition of Automotive Components and Accessories Division (ACAD) from AMA Group Ltd (ASX: AMA).

“The ACAD acquisition further diversifies GUD’s customers and channels to now include OEMs, fleets, car dealerships and specialist 4WD resellers,” said Macquarie.

“Overlapping GUD/ACAD customers represent only ~7% of revenue.”

Strong outlook for GUD share price

The transaction also gives GUD an entry point into the fast-growing four wheel drive (4WD) accessories market.

Macquarie also pointed out that the GUD share price is trading on undemanding valuations, particularly given the high visibility of GUD’s revenues and strong outlook.

The broker’s 12-month price target on GUD is $12.60 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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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