Buy, Sell, Hold – what the brokers say

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Most of the activity in the first half of the week was positive with upgrades across a variety of industries but most being driven in some way or another by the currency falls.

In the good books

Citi upgraded BHP (BHP) to Buy from Neutral, preferring base metals over bulk commodities. The broker believes metals and mining equities will be flat over the next three months but investors should be buying the dips with a view that commodity markets, particularly base metals, could surprise on the upside heading into next year.

UBS has upgraded Pacific Brands (PBG) to Neutral from Sell. The share price has weakened significantly since the year’s high of 77c and now, changing to forecasting a positive shareholder return, UBS upgrades to Neutral from Sell. Significant near-term currency and restructuring risks exist, but Pacific Brands will benefit from a five percentage point reduction in the textiles import tariff from January 2015. The broker considers the company is potentially a takeover target as it moves to a cleaner, simpler business model.

CIMB Securities has upgraded Seven West Media (SWM) to Add from Hold. CIMB prefers those TV media stocks that are taking market share and have a superior asset mix. The broker’s long-term structural view of the TV ad market remains supportive, given its ability to deliver audience reach.

Citi upgrades Woodside Petroleum (WPL) to Buy from Neutral. Citi has revised oil price forecasts, downgrading 2015 and 2016 Brent by 7% and 5% respectively. Woodside is delivering on a good strategy and Citi believes the 80% pay-out ratio is sustainable throughout the execution of Browse FLNG.

In the not-so-good books

Citi has downgraded Treasury Wine Estates (TWE) to Sell from Neutral. Discussions with the private equity groups have ceased, as the bidders could not justify a $5.20 price for Treasury Wine. The broker believes the outlook is improving, especially with a weaker Australian dollar. Nevertheless, the US de-stocking still needs to be dealt with and there is a risk with the changes to the Penfolds release dates.

The above was compiled from reports on FNArena, which tabulates the views of eight major Australian and international stock brokers: BA-Merrill Lynch, CIMB, Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie and UBS.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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