ASX shares are in a free fall but this could be just the time to buy stocks that top brokers are recommending.
Stocks on the S&P/ASX 200 Index (Index:^AXJO) lost $55 billion in value as the index slumped 2.3% during lunch time trade.
This is the sell-off I’ve been waiting for when I suggested a little over two weeks ago to start building a war chest.
ASX sell-off a buying opportunity
This was particularly so for investors, who like me, were fully invested in shares. It pays to have some firepower in reserve for opportunities – and I see this market sell-off as such an event.
Of course, no one knows where the bottom is and the ASX could fall further. But there are stocks already trading in bargain territory and these are the latest picks by leading brokers.
The broker recommendation that’s staying in the fast lane
One stock to watch is the Eagers Automotive Ltd (ASX: APE) share price. Shares in the car dealership crashed 2.7% to $13.06 at the time of writing.
This is despite management issuing a profit upgrade. But Morgan Stanley doesn’t think you should let the dip go to waste as it reiterated its “overweight” (buy) recommendation on the stock.
“APE positively surprised, upgrading 2020 underlying PBT [profit before tax] to A$209.4m,up from A$195-205m PBT guidance in mid-Dec 2020,” said the broker.
“We recently highlighted APE as a key pick into Feb, offering the best potential for raising expectations in 2021.”
The broker’s 12-month price target on the APE share price is $17 a share.
Conviction buy a golden opportunity
The St Barbara Ltd (ASX: SBM) could be another to put on your shopping list. The SBM share price collapsed 4.2% to $2.18 during lunch time trade.
This implies an 84% upside to Goldman Sach’s 12-month price target of $4 a share as the broker reminded investors that the gold miner is on its “conviction list” of ASX stocks to buy.
While St Barbara’s December quarterly production missed expectations by 5% (at 90,000 ounces of gold), Goldman is still convinced the stock is a buy.
The miner’s all-in sustaining cost (AISC) was better than forecast and production at its Gwalia mine is recovering strongly.
“Guidance was unchanged, with the company tracking below the production and above the AISC guidance ranges so far,” said Goldman.
“Improved volumes and grade at Gwalia should drive a stronger 2H [second half].”
This broker buy is a turnaround opportunity for 2021
Meanwhile, the Nufarm Ltd (ASX: NUF) share price is bucking today’s downtrend. The NUF share price jumped 2.4% to $4.77, but UBS says there’s still room for the stock to outperform.
The broker upgraded its price target on the agribusiness to $5.50 from $5.30 a share and restated its “buy” recommendation on this ASX stock.
A better-than-expected recovery in global agriculture conditions is the primary driver for the upgrade. Nufarm is tipped to grow its earnings before interest, tax, depreciation and amortisation by a whopping 38% this financial year.
“After a difficult FY20 agriculture season, it appears global planting conditions in Nufarm’s key regions have turned favourable,” said UBS.
“The improved agriculture conditions have also coincided with a significant increase in key soft commodity prices which together have driven a rapid improvement in farmer sentiment.”