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There are a few exchange-traded funds (ETFs) out there that provide specific and fairly unique diversification for investors.

Here are two to think about:

Betashares Global Cybersecurity ETF (ASX: HACK)

This ETF is provided by BetaShares. The idea is that it provides a simple and cost-effective way to gain exposure to the world’s leading cybersecurity companies in a single ASX trade.

The portfolio of the fund includes global cybersecurity giants, as well as emerging players, from a range of global locations.

Why could this ETF be an interesting one to consider? BetaShares says that with cybercrime on the rise, the demand for cybersecurity services is expected to grow strongly for the foreseeable future.

When you look at the returns after fees over the last few years, you’ll see that it has outperformed the ASX over the shorter-term and the longer-term. At the end of January it had returned 20.8% over the prior three months, 25.2% over the past year, an average of 25.1% per annum over the last three years and it had delivered an average of 20.9% per annum since inception in August 2016.

These returns are after the annual management fee of 0.67% per annum

In terms of the businesses that make up the portfolio, these are the biggest 10 exposures: Crowdstrike, Zscaler, Cisco Systems, Accenture, Splunk, Fireeye, Sailpoint Technologies, Palo Alto Networks, Fortinet and Proofpoint.

A vast majority of the holdings are listed in the US, with an 88.8% allocation. Another 3.5% is based in the UK, 3.4% is listed in Israel, a further 1.9% is listed in Japan, France is home to 1.8%, South Korea is responsible for 0.5% of the ETF and the final 0.1% is from ‘other’.

iShares Global Consumer Staples ETF (ASX: IXI)

This ETF is about providing investors exposure to around 1,200 businesses around the world that are classified as ‘consumer staples’.

Just over half of the ETF is invested in American-listed businesses, with the UK (13.1%), Switzerland (9.3%), Japan (7.2%) and France (5.2%) being the other countries with a weighting of more than 5%.

What businesses make up sizeable positions in the portfolio? These are the companies with a weighting of more than 2%: Nestle, Proctor & Gamble, Coca Cola, Walmart, Costco, Pepsico, Unilever, Philip Morris International, Diageo and L’Oreal.

This ETF has an annual management fee of 0.46% per annum.

The average return per annum over the last three years, five years and ten years has been 5.3%, 4.3% and 11.6% per annum, respectively.

According to Blackrock, this ETF has a 12-month trailing dividend yield of 2.3% and the price/earnings ratio is almost 24 times.

More reading

• 2 excellent ASX ETFs to buy
• 2 fantastic ETFs to buy for strong potential returns
• 2 great ETFs to buy for growth potential
• These top ETFs could be great options for ASX investors right now
• 2 quality ETFs to buy that are making big returns

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS and iShares Global Consumer Staples ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Respected fund manager Wilson Asset Management (WAM) has recently identified two small cap ASX shares that it owns in its portfolio.

WAM operates several listed investment companies (LICs). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE) and WAM Capital Limited (ASX: WAM).

There’s also one called WAM Microcap Limited (ASX: WMI) which targets small cap ASX shares with a market capitalisation under $300 million at the time of acquisition.

WAM says WAM Microcap targets the most exciting undervalued growth opportunities in the Australian microcap market.

The WAM Microcap portfolio has delivered gross returns (that’s before fees, expenses and taxes) of 23.8% per annum since inception in June 2017, which is superior to the S&P/ASX Small Ordinaries Accumulation Index average return of 10.3%.

These are the two small cap ASX shares that WAM outlined in its most recent monthly update:

National Tyre & Wheel Ltd (ASX: NTD)

WAM Microcap explained that National Tyre & Wheel operates entities in Australia, New Zealand and South Africa, supplying tyres and wheels to retailers and wholesalers. According to the ASX, National Tyre & Wheel has a market capitalisation of $122 million.

In January, the company announced that all business units were exceeding expectations and increased earnings guidance for its FY21 interim results, with operating earnings before interest, tax, depreciation and amortisation (EBITDA) expected to be between $15 million to $15.5 million, up from $11.5 million to $12.5 million.

After the acquisition of competitor Tyres4U in July, WAM expects the small cap ASX share will deliver substantial synergies over the next few years.

Seven West Media Ltd (ASX: SWM)

The fund manager said that this ASX share is the company that owns the Seven Network, which produces popular television shows such as Home and Away and newspapers such as The West Australian. According to the ASX, Seven West Media has a market capitalisation of $684 million.

WAM Microcap is positive about the company’s recent appointment of the CEO, James Warburton.

Mr Warburton has a strategy for the company to improve the ratings and sell non-core assets of the small cap ASX share.

The fund manager said that Seven West Media has also benefited from a cost out program implemented during the onset of the COVID-19 pandemic, which will support earnings given the increase in television advertising expenditure.

Wilson Asset Management is expecting earnings upgrades and divestments to be key catalysts for the company in its half year result.

At the company’s annual general meeting (AGM), Seven West Media gave a trading update that said that the market has improved since the August results, but remains volatile. The metro free to air (FTA) market was down 5% year on year for the period from July to October. Over the same period, the broadcaster video on demand (BVOD) market continues to strongly, up 37%, with 7plus capturing share and growing 62% in that period.

The small cap ASX share said that forward bookings suggest Seven’s advertising revenue for the first half could be down approximately 5%. However, cost savings (excluding jobkeeper) has more than offset this revenue decline.

At the end of October it had reduced net debt to $425 million with $750 million in drawn facilities and $325 million cash after a “relentless focus” on cashflow.

More reading

• This ASX growth share is cheap like a value stock
• 2 ASX shares that this fundie really likes right now
• Revealed: ASX company underpaid staff $2.3 million
• Wilson Asset Management thinks these 2 small cap ASX shares are a buy

Motley Fool contributor Tristan Harrison owns shares of WAM MICRO FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Friday the S&P/ASX 200 Index (ASX: XJO) finished the week with a disappointing decline. The benchmark index fell 0.6% to 6,806.7 points.

Will the market be able to bounce back from this on Monday? Here are five things to watch:

ASX futures pointing higher

It looks set to be a positive start to the week for the Australian share market. According to the latest SPI futures, the ASX 200 is expected to open the day 37 points or 0.55% higher this morning. This follows a positive finish to the week on Wall Street. On Friday night the Dow Jones rose 0.1%, the S&P 500 climbed 0.5%, and the Nasdaq index also rose 0.5%.

Oil prices push higher

Energy producers Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could start the week in a positive fashion after oil prices stormed higher on Friday night. According to Bloomberg, the WTI crude oil price rose 2.1% to US$59.47 a barrel and the Brent crude oil price also climbed 2.1% to US$62.43 a barrel. Oil prices have now posted gains in nine out of the last ten trading sessions.

Nearmap short seller response and half year update

The Nearmap Ltd (ASX: NEA) share price will be one to watch this morning when it returns from its trading halt. The aerial imagery technology and location data company requested a trading halt on Thursday in order to respond to a short seller attack. Hong Kong-based J Capital alleges that Nearmap is struggling in the U.S. market and using accounting tricks to hide this. Nearmap intends to bring forward the release of its half year results and release both together today.

Gold price softens

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could edge lower after the gold price softened on Friday. According to CNBC, the spot gold price dropped 0.2% to US$1,823.20 an ounce. The gold price declined after the US dollar strengthened.

Altium half year results

The Altium Limited (ASX: ALU) share price will be one to watch this morning when it hands in its half year results. Last month the electronic design software provider released an update which revealed that it expects to report a 3% decline in to US$89.6 million. All eyes will be on its guidance for FY 2021, which was maintained at that point.

More reading

• Here’s why the Altium (ASX:ALU) share price could be a buy
• 5 things to watch on the ASX 200 next week
• 2 standout ASX results from last week
• 2 of the best ASX growth shares to buy now
• These were the best performing ASX 200 shares last week

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 Nearmap Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Nearmap Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you’re currently searching for a few shares to add to your portfolio, then you could do a lot worse than the ones listed below.

Here’s why these ASX shares come highly rated right now:

Adore Beauty Group Limited (ASX: ABY)

The first ASX share to look at is Adore Beauty. It is Australia’s number one pureplay online beauty retailer with almost 600,000 active customers. It is expecting to report revenue of $158.2 million for calendar year 2020. This will be a sizeable increase on the prior corresponding period. While this is a large number, it is still only a fraction of its market opportunity. Management estimates that it has an ~$11 billion a year opportunity in the Australian beauty and personal market. Morgan Stanley is positive on the company. It currently has an overweight rating and $8.35 price target on its shares.

NEXTDC Ltd (ASX: NXT)

Another ASX share to look at is NEXTDC. It is a leading data centre-as-a-service provider with 11 centres in key locations across Australia. From these Tier III and Tier IV facilities, it provides world-class colocation services to local and international organisations. It has been a big winner from the acceleration of the shift to the cloud caused by the pandemic. This has underpinned a significant increase in demand for capacity in its data centres and strong sales and earnings growth. Looking ahead, NEXTDC now has its eyes on the Asian market and has opened up offices in a number of key locations. If this expansion is a success, it could give it a very long runway for growth. Morgans is a fan of the company. It currently has an add rating and $13.89 price target on its shares.

Xero Limited (ASX: XRO)

A final ASX share to look at is this cloud-based business and accounting software provider. Despite the pandemic’s impact on small businesses, Xero has continued to perform strongly in FY 2021. For example, in November, it released its half year results and revealed operating revenue growth of 21% to NZ$409.8 million. This was driven partly by a 19% increase in total subscribers to 2.45 million. Goldman Sachs is very bullish on the company and has a buy rating and $157.00 price target on its shares. The broker believes Xero has a multi-decade runway for strong revenue growth.

More reading

• 3 reasons why the Xero (ASX:XRO) share price could be a buy
• Is HyperOne listed on the ASX?
• Take a look at the ASX’s new cloud ETF
• 2 ASX tech shares to buy for cloud computing exposure
• 2 extraordinary ASX shares to buy in 2021

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia owns shares of Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are a few different reasons why the Altium Limited (ASX: ALU) share price could be worth looking at.

What is Altium?

Altium describes itself as a multinational software business that focuses on electronic design systems for 3D PCB design and embedded system development. The company says that its products are found everywhere from world leading electronics design systems to the grassroots electronic design community.

It has a number of different products for different clients such as Altium Designer, Altium NEXUS, Octopart and Altium 365.

Whilst the company is headquartered in San Diego, California, it has locations around the world in the US, Europe and the Asia Pacific regions.

Here’s why the Altium share price could be worth looking at

The Altium business has grown a lot over the past decade and it has become a major player in the electronic PCB software world. It has been falling in recent months due to COVID-19 impacts. 

Here are some reasons why investors may wish to consider Altium shares:

1: Growing market share

Altium management have a long-term goal of dominating the global electronic PCB software space and transforming it.

The company has previously referred to Microsoft as an example of how it gained a huge market position in the office software space. Microsoft was able to dictate what to focus development on, and it also had strong market power.

In every financial result, Altium reveals that it has grown its number of subscribers. The company has a long-term goal of 100,000 Altium Designer subscribers. In FY20 it said that its Altium Designer subscriber numbers increased by 17% to 51,006, with the number of new Altium Designer seats sold increased by 15%.

Altium says that over 30,000 companies use its software. Some of the world’s leading organisations and businesses use Altium software like Tesla, Space X, Boeing, Lockheed Martin, John Deere, Google, Bosch, CSIRO, Honeywell, Microsoft, Cochlear Limited (ASX: COH), ResMed Inc (ASX: RMD), Siemens, Amazon, Disney, Apple, Qualcomm, Broadcom and Texas Instruments.

The growing market share is a contributing reason why the Altium share price has risen over the years. 

2: Altium 365

Altium 365 is an online platform for engineers to work online together as a team and access the software. Management call this shift the ‘Netflix moment’ when a company shifts to an online model – Netflix used to just be a DVD mailing service.

The company says that Altium 365 provides opportunities for significant addressable market expansion. Not only does it modernise the electronic PCB design process and make it more likely to win more clients, through the cloud, but it also it opens up revenue opportunities.

One possibility for direct monetisation is generating transaction fees on manufacturing (like the Airbnb model) and the other option is offering premium services (like the Amazon Prime model).

Altium is shifting its whole business and operational model towards the cloud with Altium 365 being the main focus of future growth.

3: Strong balance sheet

Altium is debt free and it has been steadily growing its cash pile. In FY20 it finished with a cash balance of $91.3 million, which was 16% higher than the previous year.

That was before Altium announced the US$110 million sale of its TASKING business which will improve its balance sheet further. The sale will free up organisational capacity and allow leadership to focus on expanding Altium 365.

Altium’s cashflow and balance sheet has allowed the company to keep growing the dividend for shareholders whilst the Altium share price acts with volatility just like every other share. 

Altium valuation

According to Commsec, the Altium share price is valued at 44x FY23’s estimated earnings. That’s after a 23% fall from 21 October 2020.

More reading

• Top brokers name 3 ASX shares to buy next week
• 2 of the best ASX growth shares to buy now
• 2 high quality blue chip ASX shares to buy
• 5 fantastic ASX shares to buy right now
• Leading brokers name 3 ASX shares to sell today

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you’re planning to add a dividend share or two to your portfolio in the near future, then you may want to check out the ones listed below.

Here’s why these ASX dividend shares come highly rated right now:

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

The first ASX dividend share to look is ANZ Bank. While its shares have performed strongly in recent few months, it may not be too late to invest. Especially given the ever-improving outlook for the banking sector and the generous dividends on offer with its shares.

Morgans recently reiterated its add rating and lifted its price target on the bank’s shares to $28.50. Its analysts are forecasting a $1.27 per share dividend in FY 2021 and then a $1.50 per share dividend in FY 2022.

Based on the latest ANZ share price of $24.83, this will mean 5.1% and 6% dividend yields, respectively, over the next two years.

Aventus Group (ASX: AVN)

A second ASX dividend share to look at is Aventus. It is the largest fully-integrated owner, manager, and developer of retail parks in Australia. At the last count, its portfolio comprised 20 centres valued at $2.2 billion and covering 536,000m2 in gross leasable area.

Aventus’ portfolio features a diverse tenant base of 593 quality tenancies. From these, national retailers such as ALDI, Bunnings, and Officeworks represent an estimated ~87% of the portfolio.

One broker that is a fan of Aventus is Goldman Sachs. It has a buy rating and $2.79 price target on its shares. Goldman notes that almost two-thirds of its tenants are exposed to the household goods sector. It sees this as a big positive, as this side of the retail sector has been performing strongly during the pandemic.

Goldman is forecasting a~16.5 cents per share distribution in FY 2021. Based on the current Aventus share price, this represents a 5.9% yield.

More reading

• How big will the ASX bank dividends be in 2021 and beyond?
• CBA, Westpac, ANZ adopt same tech as Bitcoin
• 2 blue chip ASX dividend shares to buy
• ASX 200 Weekly Wrap: RBA unleashes ASX’s inner animal
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended AVENTUS RE UNIT. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Buying value shares and holding them for the long run has been a relatively successfully strategy over many decades.

It allows an investor to capitalise on low prices that provide capital growth potential, while benefitting from owning high-quality businesses that may have relatively low risks.

Since many strong businesses currently trade at low prices, it could be a good time to purchase value stocks. They could benefit from a long-term stock market recovery.

The appeal of value shares

Clearly, deciding which companies should be classed as value shares is open to debate. However, they are likely to include businesses that have dominant market positions in their respective industries that may allow them to deliver stronger profit growth than their peers. They are also likely to have solid balance sheets that can provide the required level of investment to expand into new growth areas to further enhance their financial prospects.

When such companies trade at prices that do not fully reflect their long-term financial capabilities, they could offer good value for money. Often, low share prices for high-quality businesses do not last for long, since industry or economic disruption has often given way to stronger operating conditions. Therefore, at a time when many companies could be classed as value shares following the 2020 stock market crash, there may be opportunities to build a portfolio that includes them.

A long-term stock market recovery

While many companies have posted strong share price growth in the stock market rally over recent months, a number of stocks continue to trade at low price levels. This could be because they continue to face major disruption from coronavirus or economic uncertainty. Buying them now could prove to be a sound move because of the stock market recovery that is likely to take place in the coming years.

History suggests that a strategy that aims to purchase high-quality companies when they trade at low prices has been very successful. Investors such as Warren Buffett have used such a plan to take advantage of the market cycle, where downturns have always been followed by rallies that lead the stock market to new record highs. As such, today’s value shares could gain momentum as investor sentiment improves and a global economic recovery takes hold.

Adopting a patient approach

Of course, it could take many years for some of today’s most attractive shares to deliver on their potential. The future is always unknown, but at the present time it is arguably more unpredictable than is usually the case due to uncertainty caused by coronavirus.

As such, adopting a long-term approach when buying value shares could be a prudent move. It may enable high-quality companies to deliver on their potential. Over time, a patient approach could be rewarded with market-beating returns that significantly improve an investor’s financial prospects.

More reading

• Top brokers name 3 ASX shares to buy next week
• 3 reasons why the Xero (ASX:XRO) share price could be a buy
• Top brokers name 3 ASX shares to sell next week
• Is the Fortescue (ASX:FMG) share price a buy for dividends?
• 5 things to watch on the ASX 200 next week

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that caught my eye are summarised below.

Here’s why brokers think investors ought to buy them next week:

Cochlear Limited (ASX: COH)

According to a note out of the Macquarie equities desk, its analysts have retained their outperform rating and $241.00 price target on this hearing solutions company’s shares ahead of its half year results. While trading conditions are expected to have been tough, the broker appears optimistic that the second half will be stronger and Cochlear will grow ahead of the industry by winning market share from competitors. The Cochlear share price ended the week at $206.41.

Megaport Ltd (ASX: MP1)

A note out of UBS reveals that its analysts have retained their buy rating and lifted their price target on this elastic interconnection services provider’s shares to $16.90. This follows the release of the company’s half year results last week. UBS was pleased with the update and believes the company’s outlook is improving following some COVID disruptions. The Megaport share price was fetching $14.03 at Friday’s close.

Telstra Corporation Ltd (ASX: TLS)

Another note out of UBS reveals that its analysts have retained their buy rating and $3.70 price target on this telco giant’s shares following the release of its half year results. According to the note, Telstra delivered operating earnings in line with the broker’s expectations. Looking ahead, UBS expects Telstra to achieve the mid to upper end of its FY 2021 operating earnings guidance. In addition to this, the broker was pleased with the performance of InfraCo and suspects Telstra could command an attractive fee for its mobile towers when it attempts to monetise them. The Telstra share price ended the week at $3.25.

More reading

• 2 standout ASX results from last week
• How to generate $50,000 a year from ASX dividends
• Brokers name 3 ASX shares to buy right now
• Telstra (ASX:TLS) share price rises as brokers pass judgement on its profit result
• Why brokers rate these 4 ASX shares a buy this month

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 and recommends MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Cochlear Ltd. and MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are few reasons why the Xero Limited (ASX: XRO) share price could be worth watching for the coming years.

What is Xero?

Xero describes itself as a cloud-based accounting software platform for small businesses globally. With Xero, it says that small business owners and their advisors have access to real-time financial data any time, anywhere on any device. Xero offers a platform of over 800 third-party apps and over 200 connections to banks and other financial partners.

What was the most recent result like?

Xero revealed its FY21 half-year result in November 2020.

It said that operating revenue increased by 21% to NZ$410 million. Xero’s total subscriber numbers went up 19% to 2.45 million.

Whilst average revenue per user (ARPU) decreased by 4% to NZ29.81, annualised monthly recurring revenue rose by 15% to NZ$877.5 million.

HY21 earnings before interest, tax, depreciation and amortisation (EBITDA) went up 86% NZ$120.7 million. Xero’s net profit after tax (NPAT) went up NZ$33.1 million to NZ$34.5 million and free cash flow rose NZ$49.4 million to NZ$54.3 million.

The total lifetime value of subscribers rose 15% to NZ$6.17 billion and the gross profit margin percentage increased from 85.2% in the prior corresponding period to 85.7%.

3 reasons why the Xero share price could be interesting

1: SaaS model

Software as a service (SaaS) simply means delivering a regular service in the form of software, such as accounting software.

Xero subscribers pay a monthly fee, which generates consistent cashflow for the company. Some investors view SaaS revenue as being quite defensive, particularly if those customers are sticky and loyal.

2: Growing market position

Xero is steadily gaining market share across the different geographies that it operates.

In the FY21 half-year result, it saw Australian subscriber numbers increase by 21% to 1.01 million, UK subscribers grew by 19% to 638,000 with revenue rising 33%, New Zealand subscribers went up 13% to 414,000, North American subscribers went up 17% to 251,000 and ‘rest of world’ subscribers went up 37% to 136,000. Growth was led by South Africa, and the company said that further progress was made in Singapore.

3: Strong operating leverage

Xero has been re-investing a lot of its revenue growth back into the business. In the current COVID-19 operating environment, Xero has been more careful with its spending which has shown how much its profit measures can grow when it’s not investing so hard.

One of the statistics that shows the operating leverage strength of Xero is the gross profit margin of 85.7%.

In the above HY21 result numbers, revenue increased by NZ$71.2 million, EBITDA increased by NZ$55.9 million and free cashflow went up NZ$49.4 million. That suggests that the incremental EBITDA margin and the free cashflow margin are high.

Xero’s final comments

Xero shared some comments about its outlook in the HY21 result. It said that it’s a long-term orientated business with ambitions for high-growth. Management said that the business continues to operate with disciplined cost management and targeted allocation of capital. Xero said this will allow the company to remain agile so it can continue to innovate, invest in new products and customer growth, and respond to opportunities and changes in the operating environment.

More reading

• Take a look at the ASX’s new cloud ETF
• 2 extraordinary ASX shares to buy in 2021
• What’s with the Xero (ASX:XRO) share price drop today?
• 4 steps to pick winning ASX shares
• 2 ASX 200 shares to buy for growth

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

A2 Milk Company Ltd (ASX: A2M)

A note out of Citi reveals that its analysts have retained their sell rating and cut the price target on this infant formula company’s shares to $9.40. According to the note, the broker believes the tough trading conditions a2 Milk Company is facing will persist in the second half. In addition to this, the broker has concerns over increasing demand in China from domestic brands and structural pressures in the local market. The a2 Milk share price was fetching $9.96 at Friday’s close.

AGL Energy Limited (ASX: AGL)

According to a note out of UBS, its analysts have retained their sell rating and put a $10.10 price target on this energy company’s shares. This follows the release of a half year result last week which fell short of the broker’s estimates. And while the broker notes that the company is attempting to offset the tough trading conditions by cutting costs significantly, UBS doesn’t believe it will be enough to stop its earnings from falling meaningfully in the coming years. The AGL share price ended the week at $11.05.

Galaxy Resources Limited (ASX: GXY)

Analysts at Credit Suisse have downgraded this lithium miner’s shares to an underperform rating with an improved price target of $2.10. According to the note, the broker was happy with its performance in FY 2020 and its guidance for the year ahead. However, that isn’t enough to stop Credit Suisse from downgrading its shares to underperform on valuation grounds. The Galaxy share price was trading at $2.53 at Friday’s close.

More reading

• Is the A2 Milk (ASX:A2M) share price a buy?
• Here’s why the AGL (ASX:AGL) share price is climbing higher today
• ASX 200 down 0.1%: Telstra update impresses, AMP sinks, Newcrest jumps
• Why the AGL Energy (ASX:AGL) share price continues to sink lower
• Leading brokers name 3 ASX shares to sell today

Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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