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The latest ASX 200 stocks to be upgraded by top brokers

Brendon Lau
ASX broker upgrade

The jury’s still out on whether investors should be using any dip in the market to top-up on shares as some experts believe we are facing another impending sell-off as we head into spring.

But it’s also dangerous to bet against the central banks who stand ready to not only cut interest rates to zero but to use unconventional monetary tools to stave off an economic slowdown.

Remember the saying “don’t fight the Fed”?

Those who subscribe to the latter view will be keen to know that there are three new S&P/ASX 200 (Index:^AXJO) (ASX:XJO) shares that got promoted to the “buy list” by leading brokers.

A re-rerating candidate

One such candidate is the James Hardie Industries plc (ASX: JHX) share price, which enjoyed another 2.2% jump to $22.16 on Monday after UBS upgraded the stock to “buy” from “neutral” following its better than expected quarterly earnings results.

“4% US volume growth in a market that saw US housing starts contract 6% in the quarter was a surprisingly good result, especially given weak commentary from US BMATs,” said the broker which has a 12-month price target of $23.80 per share.

“The result implies 4-5% above market growth or Primary Demand Growth (PDG), UBS-e 1%.”

UBS noted that the stock had de-rated over the past 12 months due to worries about the sustainability of PDG growth. While the stock has made a comeback, the broker believes there is more room for it to re-rate.

Drilling for gold

Another stock to get upgraded is ALS Ltd (ASX: ALQ). The stock was lifted to “outperform” from “neutral” by Credit Suisse as it believes the lab testing group’s Geochem division will perform better than what the market is expecting.

“Total number of drill holes in July rose 81% vs June to 4,140 (+8% YoY). This was better than the 39% decline observed in June,” said Credit Suisse.

“Total number of exploration projects for July was up 36% since June and marked the highest number of exploration projects since January… Our proprietary leading indicator for ALS’s Geochem sample flow suggests a solid recovery in 2H FY20.”

Credit Suisse increased its price target on ALS to $8.40 from $7.40 a share.

Every ASX dog has its day

A more controversial upgrade is the AMP Limited (ASX: AMP) share price. Credit Suisse upped its recommendation to “outperform” even though the embattled wealth manager posted a big drop in first half earnings.

However, operating earnings from the retained business was 7% above Credit Suisse’s expectations and the revived sale of its insurance division was on better terms than the broker thought was achievable.

“AMP also announced a A$650mn equity raising (plus retail offering) to allow immediate execution of their strategy to transform the business,” said the broker.

“There is a lot to digest in AMP’s strategy, with many questions still remaining; however, at a high level we believe there is a need in the market for scale advice and we support AMP’s investment to fill this gap in the market.”

Credit Suisse has a $2 a share price target on AMP.

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Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. Connect with him on Twitter @brenlau.

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.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019