ASX small cap stocks are holding up better than their larger counterparts during the Wednesday sell-off with top brokers picking their latest buy ideas for the sector.
The S&P/ASX SMALL ORDINARIES (Index: ^AXSO) slipped 0.8% into the red ahead of the market close when the S&P/ASX 200 Index (Index:^AXJO) tumbled 1.5%.
Well furnished
One small cap that’s helping hold up the Small Ordinaries is the Nick Scali Limited (ASX: NCK) share price.
Shares in the furniture retailer jumped 2.4% to $6.73 in late afternoon trade after Citigroup named it as one of its top picks in the small cap retail sector.
The broker believes it will outperform its peers this calendar year given that the scaled back JobKeeper isn’t expected to make much of a dent on sales. Most of Nick Scali’s customers are upper to middle income households who are unlikely to qualify for the wage supplement.
Further, demand for furniture could be buoyed by the federal government’s homebuilder grant and COVID-19 social restrictions.
Citi rates the stock a “buy” with a price target of $8.20 a share.
Fund times ahead
Another small cap that’s bucking the downtrend is the Mainstream Group Holdings Ltd (ASX: MAI) share price.
The stock rallied 1.6% to $0.62 after Morgans reiterated its “add” recommendation on the funds management services business following the release its quarterly update.
“FUA [funds under advice] for the quarter (A$197bn) was up 5% sequentially and 14% on the pcp (A$173bn),” said the broker.
“The quarterly lift in FUA (A$10bn) was broadly evenly split between net inflows and market movements (A$4bn-A$5bn each).”
The broker’s 12-month price target on the stock is $0.74 a share.
Good for tougher times
Meanwhile, the Credit Corp Group Limited (ASX: CCP) share price became the latest buy idea from JP Morgan.
The broker moved the debt collector to “overweight” (meaning “buy”) recommendation as it believes Credit Corp is well placed to benefit from increasing arrears.
“While CCP’s near-term outlook has some uncertainties, particularly with regards to capital allocation, we remain confident in management’s ability to allocate capital to maximize shareholder returns,” said JP Morgan.
“Australian PDL [purchase debt ledger] business never having been in a better strategic position than right now.”
The broker’s 12-month price target is $20 a share.
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More reading
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- Top brokers name 3 ASX 200 shares to buy today
- BHP’s share price tumbles with this other ASX miner after being hit by broker downgrades
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 MainstreamBPO Limited. The Motley Fool Australia has no position in any of the stocks mentioned. 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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