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Some of the country’s top fund managers have revealed some great ASX share picks for 2021.

There was a huge amount of disruption in 2020 due to the COVID-19 pandemic.

These businesses have been identified by fundies as among the best opportunities for 2021:

Downer EDI Limited (ASX: DOW)

Downer is the choice of fund manager Matthew Kidman from Centennial Asset Management.

The ASX share boasts that it has a history dating back over 150 years. It designs, builds and sustains assets, infrastructure and facilities and it’s the leading provider of integrated services in Australia and New Zealand.

Downer is currently in the process of restructuring its business and it’s selling assets. A recent sale was a mining business. Mr Kidman said that it’s selling its lumpy, heavy capital intensive components, and going into a much more capital-light service-based business with a lot of long-term government contracts.

The fund manager said that Downer is really unloved by the market but it’s making progress in fixing the business with a good balance sheet and its business divisions.

Mr Kidman believes the company will get a re-rate by the market after it divests some of the lower-returning businesses and focuses on better-returning businesses. He thinks it can trade on a higher earnings multiple and the business can also increase its earnings. The fundie believes the share price could reach at least $7 in 2021 as the story unfolds.

Mortgage Choice Limited (ASX: MOC)

Mortgage Choice is the ASX share pick for 2021 of Matthew Booker, from Spheria Asset Management. Spheria is actually the largest shareholder of Mortgage Choice at the moment.

Spheria believes the outlook for the mortgage broking industry looks “fantastic” for the next five or ten years. He said that the financial services royal commission was hell and at one point it looked like the industry may get shut down. But now, Mr Booker believes, the mortgage broker industry is actually going to proliferate.

The fundie believes that mortgage brokers will gain increasing market share of the mortgages market, and he thinks that Mortgage Choice can achieve a rising market share of the broker industry.

Tyro Payments Ltd (ASX: TYR)

The ASX share choice of Ben Clark from TMS Capital is Tyro Payments. Mr Clark thinks that the business has got a really good long-term structural growth story.

The fundie thinks Tyro is a recovery play because as the economy reopens and relaxation starts to come back in, Tyro could benefit from the amount of hospitality merchants it services and there could be “some pretty strong growth.”

There are four catalysts that TMS Capital sees for the ASX share. First, the fund manager sees the volume of transactions accelerating through the network. Between 1 December and 11 December, Tyro saw 29% growth compared to the prior corresponding period.

Second, Mr Clark thinks the ASX share will gain more of the market share and potentially enter into new verticals.

Third, he’s excited by the launch of TyroConnect. This is the integration hub that Tyro has build around it point of sale (POS) system, which TMS thinks will create more customer loyalty.

The final point was that the lending part of the business, which froze during the COVID-19 period, will rise again. It could turn into a good profit centre.

However, Tyro recently announced that it has experienced terminal connectivity issues for some of its EFTPOS terminals. An issue caused some terminals to lose connectivity, so they couldn’t transact or be updated remotely.

To fix this, Tyro has been collecting, repairing and returning impacted terminals to merchants as quickly as possible.

On 13 January 2021, about 70% of merchants were unaffected, a further 11% of Tyro’s merchants have multiple terminals with at least one functioning unit allowing them to continue to process payments. It’s the remaining 29% that are fully impacted and are the focus of the recovery effort. Approximately 2,000 terminals a day are now being collected. Tyro expects the majority of impacted merchants to be back to normal operations by the end of the week, with the rest sorted in the following week.

More reading

• Tyro (ASX:TYR) could face legal action for catastrophic outage
• Why this fund manager tips Downer EDI (ASX:DOW) as the share to own in 2021
• Why Altium, Clover, PolyNovo, & Tyro shares are dropping lower
• Angry Tyro (ASX:TYR) customers jump ship
• 7 ASX shares to buy for 2021

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 Tyro Payments. 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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Many ASX building material stocks have been outperforming but one laggard has several opportunities to play catch up in 2021.

The stock in question in the Boral Limited (ASX: BLD) share price, which is barely sitting on a 1% gain over the past year.

In contrast, the James Hardie Industries plc (ASX: JHX) share price surged 26%, BlueScope Steel Limited (ASX: BSL) share price added 17% and CSR Limited (ASX: CSR) share price gained 8%.

2021 outlook for ASX building material stocks

Sentiment towards these stocks have been bolstered by stronger than expected housing construction approvals and starts in the US and Australia.

The sector is likely to remain well supported despite fears that tailwinds will start to wane.

“Looking into 2021, investors are asking when does the sector peak? November AUS detached housing approvals of ~138k are 2 standard deviations away from the long term average of 107k, which suggests we are near the peak,” said UBS.

“However, prior peaks were defined by rate hikes. Unless we see a rate hike or credit lending restrictions tighten, housing likely has more upside this year.”

Boral share price in the spotlight

While this is good news for ASX building materials shares, it’s the Boral share price that investors will want to watch. UBS believes 2021 could be Boral’s year as it has multiple chances to play catch-up.

In the first instance, Boral could be cum-consensus upgrade. The market is expecting Boral to post a FY21 earnings before interest and tax of $412 million. UBS reckons that’s too low and is forecasting EBIT of $460 million instead.

Greater clarity on valuation

Management could also quantify a cost-out target. This could spur excitement in the stock as many have been left guessing what the savings will be. UBS believes the number if $75 million.

Thirdly, if rival Knauf sells its plasterboard assets, like UBS expects, investors will be able to value the USG Boral joint venture divesture more confidently.

“We expect more US BMAT [building materials] sales, the late 2020 sale of Midland Bricks for A$250m or 8x EV/EBITDA (2021 UBSe) signalled the start of the US BMAT exit,” said UBS.

“We think the market is not pricing in any of these four events.”

ASX stocks to buy for 2021

The broker is recommending the Boral share price as a “buy” with a 12-month price target of $5.60 a share.

But Boral isn’t the only ASX stock in the sector that UBS likes. It’s also recommending investors buy the James Hardie share price, CSR share price and Brickworks Limited (ASX: BKW) share price.

More reading

• 3 ASX dividend shares with yields above 4%
• The ASX 200 stock facing a day of reckoning at the February reporting season
• Is the “Blue Wave” of US Democrats good or bad for ASX investors?
• Got money to invest for income? Here are 3 ASX dividend shares
• 2 ASX dividend shares to buy for 2021

Motley Fool contributor Brendon Lau owns shares of BlueScope Steel Limited and James Hardie Industries plc. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Brickworks. 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 a growth investor, then you’re in luck. This is because there are a number of companies on the Australian share market that have been growing at a strong rate in recent years.

Two that have been tipped to continue this positive form over the long term are listed below. Here’s what you need to know about them:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The first ASX growth share to look at is Domino’s. This pizza chain operator has been a positive performer over the last 12 months and delivered strong growth during the pandemic.

But management is resting on its laurels and has bold long term growth plans. Domino’s had a network of 2,668 stores across Australia, New Zealand, Belgium, France, the Netherlands, Japan, Germany, Luxembourg, and Denmark at the end of FY 2020. It is now aiming to more than double this network to 5,500 stores by 2033.

And that’s just from the markets that it operates in at present. There is speculation Domino’s could expand into new areas over the next decade to boost its growth inorganically.  

Goldman Sachs is positive on Domino’s and its growth prospects. Its analysts have put a conviction buy rating and $88.00 price target on its shares. The broker believes the company has the potential to maintain a double digit operating earnings compound annual growth rate (CAGR) over the medium term.

Xero Limited (ASX: XRO)

Another growth share to look at is Xero. It is a leading cloud-based business and accounting software provider that has evolved into a full service small business solution over the last few years.

This has led to the company recording exceptionally strong customer and revenue growth over. Pleasingly, this has continued in FY 2021. During the first half, Xero recorded a 21% increase in operating revenue to NZ$409.8 million. This was underpinned by a 19% lift in subscriber numbers to 2.45 million thanks to growth across all markets.

Goldman Sachs is also a fan of Xero. It recently initiated coverage on the company with a buy rating and $157.00 price target on its shares. The broker believes Xero can grow its subscribers to 7.4 million by 2030 and generate NZ$3.4 billion in annual revenue from them.

More reading

• Fund managers are buying Domino’s (ASX:DMP) and this ASX share
• Can the Domino’s Pizza (ASX:DMP) share price go even higher?
• The Xero (ASX:XRO) share price is down 10% in 2021: Is this a buying opportunity?
• ASX 200 down 0.4%: Afterpay tumbles, bank shares lower, gold miners crash
• Why Costa, Monash IVF, Newcrest, & Xero shares are dropping lower

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 Xero. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. 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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The Rhythm Biosciences Ltd (ASX: RHY) share price roared over 12% higher yesterday to close at $1.18. Over the past six-month period, the Rhythm Biosciences share price has thundered over a staggering 1,300%.

Rhythm Biosciences share price hits record high

Just over a week ago, the Rhythm Biosciences share price hit a record high. This gain was following two positive December announcements. The first announcement related to the company appointing a manufacturer for its ColoSTAT product. 

ColoSTAT is a minimally invasive blood test that supports the early detection of bowel cancer. Colorectal cancer is presently the second biggest cause of cancer death in the world and continues to grow.

The second announcement also pertained to ColoSTAT, this time in the shape of a US patent grant. Expansion into the US market resulted in the Rhythm Biosciences technology being accessible to nearly 800 million people worldwide.

During 2020, the Rhythm Biosciences share price rocketed over 640%. The company’s current market cap is $210.6 million.

The ColoSTAT technology

The Rhythm Biosciences ColoSTAT technology is being developed as an alternative screening option for people who do not elect to participate in presently available screening options for personal, cultural, or clinical reasons.

According to Rhythm Biosciences, the technology behind this new blood test is designed to be cost effective, minimally invasive, easily run by laboratories and comparable, if not better, than current tests that are purposed to detect early stage colorectal cancer. 

Rhythm Biosciences believes that its technology has the potential to save both lives as well as public health costs. 

A global market focus 

In response to the December approval of the US patent grant for ColoSTAT, Rhythm Biosciences had the following to say about the opportunity presented:

The US represents one of the largest diagnostic markets in the world. The addition of a US patent sees Rhythm expand its global footprint and ultimately, access to a global addressable screening market of close to 800 million people.

In the US, the current 50-74-year-old screening eligible population is approximately 94 million people. This market could grow in the short term by a further 21%, following the US Preventative Services Task Force recommendation that the colorectal cancer screening age be reduced, beginning at 45 years. As a result, where the expansion in the screening age group occurs in other markets, it is expected that the current global addressable market will also increase considerably.

More reading

• Here’s why the Rhythm Bioscience (ASX:RHY) share price is up 15% to a record high
• Here are 3 ASX small cap shares with exciting product launches in 2021
• Why the Rhythm Biosciences (ASX:RHY) share price jumped over 600% this year
• The Rhythm (ASX:RHY) share price is surging 5% higher today. Here’s why.

Motley Fool contributor Gretchen Kennedy 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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Here at The Motley Fool we believe shares are a smart way to build wealth for the future.

Many Australians have agreed with this sentiment in the past year, and have joined the market for the first time in droves.

It’s excellent that they have dipped their toes into what can be a daunting experience. Getting started is the hard bit.

But once they’re in the market, novice investors need to be aware of deep-seated psychological biases that could wreck their decision-making. These are human urges that not even professionals can sometimes resist.

Falling prey to these unconscious habits could see you make big losses when buying and selling shares.

Here are 4 of the most common ones that shareholders fall victim to:

Dunning-Kruger effect

The Dunning-Kruger effect describes the way humans overestimate their own abilities.

A classic example is how most people think they are a good driver — even though by definition not everyone can be “good”.

In the share market, this is often seen in the hubris of “I can beat the market”.

The reality is that even professional fund managers find it difficult to constantly outperform indices. So how would a beginner or an amateur do better (without fluking it)?

“They try to make a lot of money quickly – that’s how movies like Wall Street make investing seem,” Stockspot founder Chris Brycki told Yahoo last year.

“But truthfully, it’s very difficult to beat the market and consistently be a winner overall.”

Escalation of commitment

This is classic behaviour from many novice investors. 

A stock you own has plunged in value. Then you buy even more shares — not because you think the company has a great future, but because you want to recover your losses.

If you had x dollars to invest, why would you deliberately put it into a company that’s in trouble? Wouldn’t it be better to invest it in something else that you have more faith in?

There is nothing wrong with buying low, but it has to be for the right reasons.

Anchoring

Anchoring is a psychological phenomenon seen in every person on a daily basis — not just in the investing world.

It describes the way humans use the first-known data as a yardstick to compare everything else that comes after it.

A perfect example is in shopping. If you first see a particular television on sale for $2,000, then seeing it sell for $1,500 at another store will seem like a fantastic deal.

But the $2,000 anchor is a random valuation, unrelated to the worth of the actual product.

A third shop may be selling at $1,200, which is the true value of the television. But a buyer that fell victim to anchoring would have already snapped it up for $1,500.

In the share market, setting arbitrary selling or buying points is a way of setting anchor.

An Afterpay Ltd (ASX: APT) shareholder who sold for $20 last year after seeing it sink to $8 in March is an example of this. (It’s now more than $110)

Stock investors must always tell themselves to ignore earlier numbers and judge each selling and buying opportunity purely on merit.

Illusion of control

Our The Motley Fool colleagues in the US describe this best:

If you’ve ever made money day trading and patted yourself on the back for a job well done, you’re probably a victim of the illusion of control.

Related to the Dunning-Kruger effect, this is when an investor thinks their own skill led to a favourable outcome — even though it was mostly luck.

This psychological bias is often seen in punters who indulge in short-term trading.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 2 exciting ASX tech shares to buy today
• Will the ASX see a share market bubble in 2021?
• Big brokers still love the Afterpay (ASX:APT) share price
• Why Afterpay, Altium, Mesoblast, & PolyNovo shares are dropping lower

Motley Fool contributor Tony Yoo owns shares of AFTERPAY T FPO. The Motley Fool Australia owns shares of AFTERPAY T 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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The Premier Investments Limited (ASX: PMV) share price was on fire on Wednesday following the release of a trading update.

The retail conglomerate’s shares ended the day 13% higher at $25.35.

At one stage, the Premier Investments share price was up almost 19% to a record high of $26.70.

How is Premier Investments performing?

Premier Investments’ update revealed that its Retail business has been performing exceptionally well during the first half of FY 2021.

As a result, the company is expecting this side of the business to deliver earnings before interest and tax (EBIT) of $221 million to $233 million for the 27 weeks ending 30 January.

This will be up between 75% and 85% on the EBIT of $126.1 million it achieved during the 26 weeks ended 25 January 2020.

Management advised that this has been driven by strong like for like sales, a significant lift in higher margin online sales, and cost savings largely from rental reductions.

Is it too late invest?

One broker that believes it is too late to invest is Goldman Sachs.

According to a note out of the broker this morning, its analysts have retained their sell rating but lifted their price target slightly to $20.80. This price target implies potential downside of 18% from yesterday’s close price.

The broker doesn’t appear to believe that this strong form will last beyond FY 2021 and is forecasting a decline in earnings in FY 2022.

The broker is forecasting earnings per share of $1.40 in FY 2021 but then just $1.03 in FY 2022 and $1.09 in FY 2023. In light of this, it feels its shares are expensive compared to peers.

Goldman explained: “While the higher margin online sales is likely to be an ongoing structural benefit for PMV, the unique conditions driving the strong sales environment are, in our view, going to be difficult to sustain beyond FY21 as will be the reductions to operating costs. We estimate that GM expansion, operating leverage and the cost mitigating factors have all been material to this profit outcome.”

“PMV looks reasonably priced on FY21E P/E of 18x compared to its 5-year average of 19.9x. However, on a sustainable profit basis, PMV continues to screen expensive vs. its peers, currently trading at 24.7x on a reported P/E basis and 22.1x when adjusted for the market value of its ownership of Breville Group (BRG: ASX) and Myer (MYR: ASX),” it concluded.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX 200 rises 0.1%
• The Accent Group (ASX:AX1) share price just got hit by a broker downgrade
• Goldman Sachs says sell Premier Investments (ASX:PMV) shares into today’s big rally
• ASX 200 down 0.3%: Altium sinks, Premier Investments rockets, energy shares rise

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. 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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Are you looking to boost your portfolio with some income options?

Then you might want to take a look at the ASX dividend shares listed below. Here’s what you need to know about them:

Charter Hall Social Infrastructure REIT (ASX: CQE)

Charter Hall Social Infrastructure REIT is the largest ASX-listed real estate investment trust investing in social infrastructure properties.

The company targets ongoing capital growth through its focus on high quality assets in strategic locations with specialist use, limited competition, low substitution risk. These assets include childcare centres and government properties. Management believes this focus will drive high tenant retention rates over the long term.

One broker that is a fan of Charter Hall Social Infrastructure REIT is Goldman Sachs. It has a conviction buy rating and $3.35 price target on its shares. The broker is forecasting a 15 cents per share dividend in FY 2021. Based on the current Charter Hall Social Infrastructure REIT share price, this represents a 4.9% yield.

Telstra Corporation Ltd (ASX: TLS)

Over the last few years, this telco giant has been forced to reduce its dividend on a number of occasions due to the negative impact that the NBN rollout was having on its earnings.

The good news is that the dividend cuts now appear to be over and brokers are forecasting a stable 16 cents per share fully franked dividend for the foreseeable future.

This is being underpinned by the success of its T22 strategy, which is reducing costs and simplifying its business. In addition to this, the arrival of 5G internet is expected to give its average mobile revenue per user metric a boost in the coming years.

One broker that is positive on the company is UBS. It has a buy rating and $3.70 price target on its shares and is forecasting a 16 cents per share dividend. This equates to a 5.2% dividend yield.

More reading

• 2 little-known small cap ASX shares rated as buys by fundie
• Interest rates could be at ultra low levels for years, so buy this ASX dividend share
• 2 quality ASX dividend shares to buy
• Infinite games: 3 ASX shares with long-term visions
• These were the best-performing ASX IPOs in 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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 Wednesday the S&P/ASX 200 Index (ASX: XJO) ended its losing streak and recorded a small gain. The benchmark index rose 0.1% to 6,686.6 points.

Will the market be able to build on this on Thursday? Here are five things to watch:

ASX 200 expected to edge higher.

The Australian share market looks set to edge higher again on Thursday. According to the latest SPI futures, the ASX 200 is expected to open the day 13 points or 0.2% higher this morning. This follows a positive night of trade on Wall Street, which in late trade sees the Dow Jones up 0.25%, the S&P 500 up 0.5%, and the Nasdaq 0.7% higher.

Tech shares on watch.

The tech sector has been underperforming so far in 2021, but things could be better today for the likes of Afterpay Ltd (ASX: APT) and Altium Limited (ASX: ALU). This follows a strong night of trade on the technology-focused Nasdaq index overnight. The local tech sector has a tendency to follow its lead.

Oil prices fall.

Energy producers Beach Energy Limited (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) were on form on Wednesday and recorded strong gains. They could give back some of those gains today after oil prices softened overnight due to demand concerns. According to Bloomberg, the WTI crude oil price is down 0.3% to US$53.07 a barrel and the Brent crude oil price has fallen 0.7% to US$56.18 a barrel.

Gold price higher.

It could be a good day for gold miners such as Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) after the gold price pushed higher. According to CNBC, the gold futures price is up 0.5% to US$1,854.10 an ounce. The gold price was given a boost by stimulus hopes in the US.

Premier Investments given sell rating.

After jumping 13% on Wednesday, one leading broker feels the Premier Investments Limited (ASX: PMV) share price is overvalued now. According to a note out of Goldman Sachs, its analysts have put a sell rating and $20.80 price target on the retail conglomerate’s shares. While it was impressed with its update, it doesn’t see value in its shares at this level.

More reading

• ASX 200 rises 0.1%
• Iluka (ASX:ILU) share price surged higher on a potential $1bn+ valuation uplift
• ASX energy shares exploded today. Too late to buy?
• 2 exciting ASX tech shares to buy today
• Top brokers name 3 ASX shares to buy today

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 Altium. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia owns shares of AFTERPAY T 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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With the pandemic accelerating the shift to online shopping by as much as five years, ecommerce companies appear very well-placed for growth in the coming years.

But how should investors gain exposure to this trend? Two ecommerce companies that are rated as buys are listed below:

Kogan.com Ltd (ASX: KGN)

One of Australia’s fastest growing ecommerce companies is Kogan. After a stellar performance in FY 2020, Kogan’s strong form has continued in the current financial year. 

During the first four months of FY 2021, Kogan’s sales were up 99.8% on the prior corresponding period. Things were even better for its earnings thanks to margin improvements. The company’s operating earnings grew a massive 268.8% over the same period last year.

Since then, the company has bolstered its growth through the value accretive acquisition of fellow ecommerce company Mighty Ape for $122 million. Mighty Ape operates online stores in New Zealand and Australia and has a focus on gaming, toys, and other entertainment categories. It has more than 690,000 unique customers and more than 895,000 subscribers.

For the 12 months ended 30 September, Mighty Ape generated revenue of A$120.1 million, gross profit of A$37.8 million, and EBITDA of A$9.9 million.

One broker that was a fan of the acquisition was Canaccord Genuity. It has a buy rating and $25.00 price target on Kogan’s shares. It sees the potential for significant revenue and cost synergies from the deal.

MyDeal.com.au Limited (ASX: MYD)

Another ecommerce company growing quickly is MyDeal.com.au. It is an online retail marketplace provider with a focus on furniture, homewares, appliances, technology, baby products, and hardware.

As with Kogan, MyDeal has been a very strong performer over the last 12 months and this has continued in FY 2021. During the first quarter, the company delivered a 317% increase in gross sales to $56.67 million. This was underpinned by a 268% increase in active customers to 669,897.

RBC Capital Markets is very positive on the company. The broker has a buy rating and $1.60 price target on its shares. It believes MyDeal is at an inflection point as annualised gross transaction value exceeds $200 million and customer numbers close in on 700,000.

More reading

• 3 highly rated ASX growth shares to buy now
• 2 of the best ASX shares to buy this month
• Brokers name 3 ASX shares to buy right now
• 2 high quality ASX growth shares to buy today
• How to invest in ASX shares in a post-COVID world 

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 Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com 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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Big brokers have come off their holiday breaks this week with updates on a number of ASX 200 shares. Here are the broker downgrades from 12 January 2021 to watch out for. 

AGL Energy Limited (ASX: AGL) 

The AGL share price has fallen more than 40% in the last 12 months, despite a market leading 7.80% dividend yield. 

The energy company recently slashed its FY21 guidance, now expecting underlying profit after tax to be between $500 million and $580 million, down from the previous guidance range of $560 million to $660 million.

As a result, Credit Suisse lowered its AGL share price target from $12.60 to $11.00 with an underperform rating. This represents a downside of 9% to its share price of $12.07 at close of trade today. 

ASX Ltd (ASX: ASX) 

The ASX share price has struggled to deliver shareholder return in 2020,  slumping 10% over the year. The most notable event for ASX last year was on 16 November, where a software glitched caused an embarrassing all-day outage. 

Credit Suisse lowered its ASX share price target from $73.00 to $71.00 with an underperform rating. This follows a similar logic to that of Goldman Sachs, which maintained a sell rating for ASX shares on 20 December 2020.

Goldman described the company at the time as “expensive given headwinds” after the company’s mixed performance, with weaker derivatives and over-the-counter (OTC) markets but solid performances across its listings and issuer services, trading services and equity post-trade services. 

Magellan Financial Group Ltd (ASX: MFG) 

Goldman Sachs remains sell rated on Magellan with a price target of $50.70. The broker’s commentary highlights Magellan’s funds under management falling 1.6% from $103.0 billion to $1.1.4 billion during December.

The key drivers of Goldman’s stance was the fund’s underperformance. Relative performance was soft in December, with the Global Fund underperforming the benchmark by -2.7%, following an -8.8% underperformance in November. The broker believes that Magellan is most negatively exposed to the recent US senate run-off elections which could result in lower performance fees and funds under management.  

Citi also lowered its Magellan share price target from $60.00 to $56.50 with a neutral rating. While Credit Suisse lowered its price target from $58.50 to $55.00. 

More reading

• The AGL (ASX:AGL) share price just hit a 12-year low
• Leading brokers name 3 ASX shares to sell today
• ASX 200 drops 0.9%
• What’s been happening with the Magellan (ASX:MFG) share price?
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor Lina Lim 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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