Treasurer Josh Frydenberg declared that we are in a recession for the first time in 30 years! But this isn’t stopping our market from rallying or brokers from upgrading some S&P/ASX 200 Index (Index:^AXJO) stocks.

Australian GDP contracted 0.3% in the March quarter and we need two consecutive quarters of declines before officially going into a recession.

But with all the signs point to another negative number for the current quarter, Frydenberg isn’t waiting.

Recession can’t slow the rally

The news didn’t faze investors with the top 200 stock benchmark jumping 1.8% as we head to the close with most sectors trading in the black.

But it isn’t too late to join the party. In fact, top brokers have only just upgraded these ASX stocks to “buy”.

Electronic and whitegoods retailer JB Hi-Fi Limited (ASX: JBH) got bumped up to “outperform” by Macquarie Group Ltd (ASX: MQG).

This partly explains why the JB Hi-Fi share price jumped 2.5% to $39.78 in late afternoon trade.

Earnings upgrade candidate

The broker spoke with industry insiders and the feedback it got was that there was strong demand for electronics.

“Industry feedback suggests almost all categories in consumer electronics and home appliances are in growth and margins are the best they have been in a long time, with consumers far less picky on brands and happy to pay full ticket prices,” said the broker.

“We had originally expected additional COVID-19 costs would outweigh less promotional activity, but volumes are said to be high enough to compensate these.”

Macquarie thinks there’s a good chance JB Hi-Fi will unveil a pleasant surprise when it reports its full year profit result in August. The broker’s price target on the stock is $41 a share.

Re-rating opportunity

Another stock that got upgraded today by UBS is gold miner Newcrest Mining Limited (ASX: NCM).

Many ASX gold producers like Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) have been outperforming with the gold price, but Newcrest is lagging behind.

UBS thinks this isn’t justified and is urging investors to rotate into Newcrest, which it upgraded to “buy” from “neutral”. This is the first time the broker has rated Newcrest a buy since August 2012!

“We have changed our thesis on Newcrest based on our in-depth work on Red Chris and Havieron,” said the broker.

“The inclusion of these projects challenges market perceptions that production is peaking in 2020-21 which was also a component of our prior Sell thesis.

“These projects can materially change market estimates.”

UBS lifted its price target on Newcrest by 6% to $35 a share.

More reading

• These ASX 200 shares could be perfect for a retirement portfolio
• Why I’m not afraid to invest in shares during this recession
• Why JB Hi-Fi shares and 1 other are a buy for long-term growth
• Top brokers name 3 ASX 200 shares to buy right now
• Why Austal, Evolution, Newcrest, & Pro Medicus are tumbling lower

Motley Fool contributor Brendon Lau owns shares of Evolution Mining Limited and Macquarie Group Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group 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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I think it is well worth keeping an eye on what substantial shareholders of companies do.

A substantial shareholder is a shareholder that owns 5% or more of a company’s shares. These are often large investors, asset managers, and investment funds.

ASX rules mean that these shareholders are obliged to provide substantial holding notices relating to movements above or below the threshold, and any change of 1% or more.

As a result, I think investors should use these notices to their advantage. After all, they show where the smart money is going.

Two notices that have caught my eye are summarised below:

Boral Limited (ASX: BLD)

A notice of initial substantial holder reveals that Seven Group Holdings Ltd (ASX: SVW) has been buying this building products company’s shares. Over the last three months the investment company has built up a holding of 122,565,694 Boral shares. This means it now has a 10% stake in the company.

Seven Group, which has a number of investments in the construction industry, started picking up shares after they fell heavily during the market crash. Though, it has been buying them as recently as on Tuesday. Boral’s shares are still down over 37% from their 52-week high. This appears to be a level which Seven Group believes is good value.

Marley Spoon AG (ASX: MMM)

According to a change of interests of substantial holder notice, Perennial Value Management has continued to increase its stake in this meal kit delivery company. The notice reveals that over the last three weeks the fund manager has picked up almost 6 million Marley Spoon shares through on-market trades. This has increased its holding in the company from approximately 16.3 million shares, to ~22.2 million shares. This represents a 12.7% stake in the company.

In April Marley Spoon revealed that it experienced a surge in demand for its meal kit subscriptions because of lockdowns and restaurant closures. Time will tell whether these new customers will be retained when restrictions lift, but Perennial Value Management appears confident they will.

More reading

• This embattled ASX 200 company could be the next M&A target
• These ASX shares are set to get a big boost from the next big government stimulus
• These 5 ASX 200 shares were last week’s biggest winners
• ASX 200 Weekly Wrap: Surging bank shares push ASX toward 6,000
• These were the best performing ASX 200 shares last week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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