Don’t be put off by the falls on the S&P/ASX 200 Index (Index:^AXJO). The pull back is still regarded by experts as a buying opportunity and brokers have listed their latest ASX buy ideas.
The top 200 stock benchmark lost ground for the fourth consecutive day as it retreated by 0.7%. Renewed worries about COVID-19 and the November US Presidential Election are giving investors reason to take profit.
But these risks are unlikely to kill the Santa Rally in December, in my view, and the sell-off gives you a chance to buy some beaten down stocks.
Top buy in the telecom sector
One that UBS is urging you to buy now is the Telstra Corporation Ltd (ASX: TLS) share price.
Shares in our largest telco is hovering around a two-year low and the broker is calling it the top pick in the sector.
At its current price, the market is pricing in most (if not all) of the dividend cut and earning per share (EPS) risks.
No good news priced into Telstra’s share price
On the other hand, there is no upside priced in for 5G opportunities, longer-term NBN optionality and possibility that Optus will behave more rationally. On that last point, UBS reckons this could happen in 2021.
“We think risk vs. reward therefore looks very favourable here, and TLS is now our preferred Buy across our TMT coverage,” said UBS.
“We remind that TLS traded at ~$3.50 as recently as Aug-20, after its postpaid mobile price increases.
“However, we believe unfavourable Optus marketing & downgrades to TLS’s long-term ROIC targets have led some investors to lose faith in potential mobile market repair.”
The broker calls Telstra a “high conviction buy” and its 12-month price target on the stock is $3.70 a share.
Senex Energy upgraded
Another “buy” idea from Morgans is the Senex Energy Ltd (ASX: SXY) share price.
The broker upped its price target on the gas company to $0.48 from $0.42 cents and reiterated its “add” recommendation after Senex was picked as the preferred tenderer for two new exploration blocks in the Surat and Bowen Basins.
Trading at a discount
“Of key importance to SXY, the Surat block sits immediately adjoining its flagship Atlas operation. We already consider Atlas to be SXY’s highest value asset,” said Morgans.
“SXY is confident this is low-risk commercial ground given it is surrounded by existing Atlas ground to the west and Shell ground to the north.
“The new block will grow Atlas acreage by 31% to 76km2 (from 58km2), and will add an immediate 41 PJ [petajoule] to reserves once a production license is obtained.”
This should support around 15 years of expanded production from Atlas.
As for the Bowen Basin, management considers the ground prospective given it sits on trend between the existing Scotia and Meridian gas fields.
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More reading
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- ASX 200 hits 3-month low! Is it time to buy ASX shares today?
- Why the News Corp (ASX:NWS) share price is plunging today
- Why you should look beyond the second wave to the blue investment skies beyond
Motley Fool contributor Brendon Lau owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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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