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Best 3 ASX stocks to watch in December 2020

With market sentiment improving, we look at 3 ASX-listed stocks that recently attracted Buy ratings from UBS.

Best 3 ASX stocks to watch in December 2020 Source: Bloomberg

ASX 200 performance: A month in review

November saw optimism firmly return to Australian equity markets, with the ASX 200 benchmark rising 10.7% or 637 points between November 2 and December 1.

On Wednesday the ASX fell into negative territory.

Markets have rallied in recent times off the back of news regarding two effective COVID-19 vaccines – one developed by Moderna and the other, by a joint partnership between Pfizer and BioNTech. This news looks to have fast-tracked the market’s projections around when global economies will reopen and the implied positive impacts of such.

It’s also seen many old economy stocks rally strongly, with Australian banks, for example, trading up firmly in the last month.

Given this bullish atmosphere, we look at 3 stocks that investors may consider worth watching in December. All of the 3 stocks below carry Buy ratings from UBS.

Aristocrat Leisure share price: -7% YTD

Like many companies, Aristocrat Leisure (ALL) has seen its operational performance decline in 2020 – with the company reporting lower normalised revenue, earnings (EBITDA) and profits (NPAT).

Despite that broad based weakness, Aristocrat’s digital gaming segment proved a strong performer in 2020, delivering strong double-digit growth across bookings, revenue and profits. This, said the company, was driven by growth in Aristocrat’s RAID: Shadow Legends and Social Casino products.

Indeed, despite lower group-level results, analysts from UBS remain constructive on the stock, in late November reiterating a Buy rating and price target of $38.80 per share.

The investment bank values ALL on a price to earnings ratio 'P/E in line with the market.'

Nufarm share price: -33% YTD

With the company recently announcing a financial year shift – with its fiscal year now set to end in September opposed to July – Nufarm (NUF) in late November released a market update covering its operational performance over the last two months.

To be sure, these were a good two months, with the company reporting year-over-year revenue growth of 47.5%, earnings (EBITDA) growth of 17.9% and operational profit growth of 8.8%.

This, said the company, was driven by 'improved demand relative to the proforma comparative period and cost savings from the performance improvement program.'

UBS reiterated their Buy rating and upped their price target to $5.30 per share in response to this release. The investment bank argued that this trading update showed that 'recent positive earnings momentum has continued' while also noting that 'the risk/reward balance remaining favourable’ at Nufarm’s current valuation.

Flexigroup, Humm share price: -29% YTD

Flexigroup, rebranded as Humm Group and trading under the ticker HUM, has traded flatly YTD, down around 29% in that period.

Despite that, the company continues to refine its buy now pay later (BNPL) offering, recently announcing a partnership with ASX-listed neo-bank Douugh to launch a BNPL product in the US market.

Commenting on this partnership, Humm's CEO, Rebecca James said: 'Through our proposed joint venture with Douugh, we are taking our first steps into the United States as a company. At the same time, we are demonstrating how Humm Ventures can create innovative and novel ways to take Humm's world class technology and capabilities and expand its relevance and distribution.'

Prior to that announcement, UBS reiterated its bullish stance on the stock – then Flexigroup, now Humm – assigning the company a Buy rating and 12-month price target of $1.45 per share. At the time UBS analysts described the company as a value play in the BNPL sector, arguing that 'Although FXL is not a market leader, we believe its strategic shift towards BNPL […] makes sense, and has an opportunity to lift awareness and usage of Humm (low) in a high-growth market.’

Do you have a view on the Humm, Nufarm or Aristocrat share prices?

Bullish or bearish, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Nufarm using CFDs, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘Nufarm’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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