Investors may be getting concerned about valuations, but leading brokers are urging you to buy three ASX shares even as they are trading at or near their 52-week highs.
The S&P/ASX 200 Index (Index:^AXJO) may be backing away from record highs on Thursday. But with the index up more than 30% over the past year amid resurging worries about COVID-19, investors are right to ask if ASX shares have overshot their fundamentals.
While these worries are justified for some parts of our market, brokers see more upside for a handful of outperforming ASX shares.
Upgrade reinforces buy recommendation
One such example is the Medibank Private Ltd (ASX: MPL) share price, which is trading at its highest point in the last year.
Morgan Stanley reckons the private health insurer is still worth buying at these levels after management upgraded its guidance.
“MPL now expect FY21 policyholder growth between 3.5%-4% including 1.2-1.4% growth in MPL brand,” said the broker.
“This compares to previous guidance of >3%. MSe +3.2%. MPLsaid despite the 1 April premium increase, customer retention is significantly better than in the prior corresponding period.”
Further, claims are coming in below Medibank’s expectations and Morgan Stanley has reiterated its “overweight” recommendation and price target of $3.20 a share.
More upside for this outperforming ASX share
Another that’s within striking distance of its 52-week high is the QBE Insurance Group Ltd (ASX: QBE) share price.
The QBE share price jumped nearly 4% today to $10.85, and that’s close to its $10.98 high it hit in August last year.
While the rate of insurance premium increases has slowed from 2020, this has not deterred UBS from repeating its “buy” call on the general insurer.
Volume offsets slowdown
“The slowdown in premium rate increases from the peak in 2020 is line with our expectations,” said UBS.
“However, volume growth appears ahead of what we are expecting and crop also tracking ahead of our forecasts. Note we expect a 5-6% currency benefit for QBE in FY21 reported numbers.”
UBS increased its 12-month price target on the stock to $11.50 from $10.25 a share.
Scaling new peaks
Meanwhile, it may only be a matter of time before the OZ Minerals Limited (ASX: OZL) share price sets a new multi-year high.
The OZ Minerals share price is currently trading at $24.77 and is only a tat below last month’s 13-year peak of $25.24.
Despite that, Macquarie Group Ltd (ASX: MQG) thinks there’s a lot more room for the copper miner to run.
ASX share with good copper exposure
This is in part due to OZ Minerals expansion plan for its two key assets, Prominent Hill and Carrapateena.
“OZL is benefitting from growth targets at both core assets; has upside optionality from the development of West Musgrave; and has material upside to earnings driven by buoyant copper prices,” explained Macquarie.
“In a spot price scenario, earnings increase by 25% in CY21 and by 75% in CY22.”
The broker is recommending the OZ Mineral share price as “outperform” with a 12-month price target of $29.50 a share.