If you’re looking for strong returns over the next decade, then I think the mid cap space is a great place to look.

This is because there are a good number of companies at this side of the market which have the potential to grow materially in the coming years.

But which mid cap ASX shares should you buy? Three that I think are among the best on offer are listed below:

EML Payments Ltd (ASX: EML)

EML Payments is a payments company with a focus on digital gift cards and pre-paid cards. It provides its services to shopping centres, online betting companies, and salary packaging companies. EML had been growing at a very strong rate over the last few years prior to the pandemic. And while its growth this year will inevitably be stifled, I believe it is well-positioned to resume its growth once the crisis passes. Especially following the recent acquisition of Prepaid Financial Services. This allows EML to enter the emerging field of banking as a service (BaaS) and could be a key driver of growth in the coming years.

Electro Optic Systems (ASX: EOS)

Another mid cap share to look at is Electro Optic Systems. It is Australia’s largest aerospace company and the largest defence exporter in the Southern Hemisphere. I like the company due to its experienced team and the long-established partnerships it has with major global aerospace giants. Another big positive is its massive backlog of work. This alone should support solid earnings growth over the next few years and is likely to be bolstered by new contracts along the way.

Nanosonics Ltd (ASX: NAN)

A final mid cap share to consider buying is Nanosonics. As well as having strong growth potential thanks to its industry-leading trophon EPR disinfection system, the impending launch of several new infection control products targeting unmet needs could take its growth to the next level. Especially given the growing importance of infection control and the fact that these secretive products are understood to have similar market opportunities to the trophon EPR disinfection system.

More reading

• 4 ASX fintech shares to make you rich
• How much should you pay for earnings reliability from shares?
• 3 outstanding ASX growth shares to invest $3,000 into today
• Have $500 to invest? Then buy these 5 ASX 200 shares immediately
• Why Afterpay and cohorts could confirm the economy bottomed in April

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited and Nanosonics Limited. The Motley Fool Australia owns shares of and has recommended Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Emerchants Limited and Nanosonics 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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Today, the S&P/ASX 200 Index (ASX: XJO) is again moving higher, up 1.1% at the time of writing to 5,835.8 points. It could be, that after weeks of flatlining, this ASX 200 bull market is now set to break the psychologically important 6,000-point barrier. If it succeeds in doing so, it will be for the first time since early March.

What an incredible run this has been too. Since 23 March, the ASX 200 has now rallied over 28%.

But one ASX fund manager isn’t too keen on piling into this ASX 200 bull market. On the contrary, Scott Haslem of Crestone Wealth Management is starting to see some stretched valuations in the market. This is something that doesn’t herald good times ahead.

According to reporting in today’s Australian Financial Review (AFR), Mr Haslem is ‘holding back’ from chasing this bull market for 2 reasons.

Confessions of a nervous ASX fundie

Firstly, he believes valuations are starting to get ahead of themselves.

“The rally is a rational response to the improving economic backdrop”, the AFR quotes Haslem as stating. “The issue is what price you want to pay for that rationality.”

Of course, the unprecedented monetary policy that governments around the world are executing, including both here and in the United States, makes it difficult to say that shares are overvalued per se. But a 30% rally in just over 2 months is definitely worth examining.

Secondly, Haslem is worried markets haven’t fully priced in the earnings hit that coronavirus is yet to unload on the ASX. Companies across the board have had to increase their costs dramatically in order to implement social distancing rules. This is almost certain to impact their profitability and, therefore, their share prices. 

“The likely persistence of social distancing – and rightly so – is likely to slow the revenue of these companies,” Haslem stated. “And then other behaviours are going to have to change to adjust to the new environment, and that’s going to add additional cost to doing business…” He went on to say “Boards and companies are going to have to be looking for multiple supply chains for each component, and that’s going to add to costs.”

Haslem is worried about companies getting hit with a ‘double whammy’. Not only are revenues likely to be subdued for some time among many ASX businesses, but these new costs are likely to be semi-permanent. These means a continuation of burning the earnings candle at both ends.

Should ASX investors be worried?

I think Mr Haslem makes some good points here. There’s no doubt now that this ASX 200 bull market is pricing in a strong and rapid recovery for our economy, as well as arguably for the global economy.

That leaves very little wiggle room on share pricing if things don’t pan out that way.

But does this mean we should sell out of all shares? No, not in my view anyway.

I think the best course of action an ASX investor can take today is to reassess their portfolio. Make sure it consists only of companies you have long-term faith in. Additionally, making sure there’s a significant cash position available to take advantage of any future market downturns is also important. This can provide you with peace of mind if another crash does come, as well as some firepower to take advantage of lower share prices.

More reading

• Why now could be a better time to buy the underperforming CSL share price
• ASX 200 up 2.4%: Blackmores raises $92m, big four banks jump, Nearmap rockets
• The next looming test for the ASX 200 bull market is just round the corner
• Why you shouldn’t fear an ASX share market crash
• Where will the Telstra share price be next year?

Motley Fool contributor Sebastian Bowen 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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On Wednesday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below.

Here’s why these brokers are bearish on them:

Ansell Limited (ASX: ANN)

According to a note out of Macquarie, its analysts have retained their underperform rating but lifted the price target on this health and safety products company’s shares to $30.40. Although the broker believes Ansell is well-positioned to benefit from increasing demand for personal protective equipment, it has concerns over capacity constraints. It doesn’t believe the market is factoring this into its current valuation and thus believes its shares are overvalued. The Ansell share price is trading at $34.47 this afternoon.

Blackmores Limited (ASX: BKL)

A note out of Credit Suisse reveals that its analysts have retained their underperform rating but lifted their price target on this health supplements company’s shares to $65.00. The broker appears to support the company’s decision to strengthen its balance sheet. It also notes that Blackmores has reaffirmed its profit guidance for FY 2020. However, this isn’t enough for a change in rating. The broker retains its underperform rating on valuation grounds. The Blackmores share price is up 1.5% to $80.10 on Thursday.

Sonic Healthcare Limited (ASX: SHL)

Analysts at UBS have retained their sell rating but lifted their price target on this healthcare company’s shares to $25.10. The broker has been analysing pandemic testing data and believes that testing rates have already peaked in Australia. It also notes that testing rates have flattened in the UK and growth expected to slow in the United States. This could mean Sonic doesn’t benefit as greatly as the market was expecting from testing activities. The Sonic share price is trading at $29.15 this afternoon

More reading

• Why ANZ, Blackmores, IDP Education, & Nearmap shares are racing higher
• ASX 200 up 2.4%: Blackmores raises $92m, big four banks jump, Nearmap rockets
• Why the Blackmores share price is charging higher today
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 edges down, bank share prices fly

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia has recommended Ansell Ltd. and Sonic Healthcare 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.

The post Top brokers name 3 ASX 200 shares to sell today appeared first on Motley Fool Australia.

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