When brokers upgrade a share to a buy rating, it can create incredible buying pressure that sends the share price soaring.
A recent example would be Freelancer Ltd (ASX: FLN) which jumped a massive 11% on Monday after being given a buy rating by investment bank UBS. Great news for shareholders who have seen major declines in the share price this year.
Elsewhere, three other shares have just been upgraded by brokers to a buy rating according to the brokerage arm of Commonwealth Bank of Australia (ASX: CBA) are as follows:
Beach Energy Ltd (ASX: BPT)
Brokers recently upgraded Beach Energy to a strong buy. This upgrade appears to come off the back of its acquisition of Drillsearch Energy. This acquisition locked in Beach Energy as Australia's largest on-shore oil producer and strengthened its proven and probable oil reserves which had been dwindling. While the shares do look better value than Santos Ltd (ASX: STO), any drops in commodity prices could certainly bring the share price down. For this reason I would approach this one with caution.
Fairfax Media Limited (ASX: FXJ)
The beaten-down shares of Fairfax Media were upgraded by brokers to a moderate buy. There has been talk of Fairfax Media merging with Nine Entertainment Co Holdings Ltd (ASX: NEC) recently. This comes after the Federal government approved a selection of media reforms which include the abolishment of the reach rule and the two-out-of-three cross-media ownership law. Brokers appear hopeful that this will be enough to turn around the fortunes of the struggling media sector.
IPH Ltd (ASX: IPH)
IPH is the leading intellectual property services group in the Asia-Pacific region, providing a range of IP services to Fortune 500 companies and multinationals. Its shareholders will be relieved to learn that brokers upgraded it to a strong buy at the end of last week. Its share price has dropped almost 25% this year, so they will be hopeful that it may start to retrace these losses now.
Foolish takeaway
Out of these three shares I would pick IPH. I thought its interim results were impressive with significant growth on both the top and bottom lines. It is also likely to produce strong earnings growth ahead, with analysts expecting earnings to grow at an average of 22% per annum through to 2018. But if you would like even more investment options, then look no further than these three blue-chip shares which could be about to soar.
