Investors have no shortage of shares to invest in.
Sure, there mightn't be as many public businesses in Australia as there are in the United States or Europe, but there are still nearly 2,200 shares listed on the ASX.
While it's nice to have optionality as an investor, however, it can also be difficult to know where to start looking for new ideas.
Stocks to avoid
First, you can forget about all the mining exploration businesses which are speculative, at very best. There are plenty of others with market values so small, and shares so illiquid, that you'd have a tough time buying as well.
It's likely that you're also familiar with certain industries based on your own career and experiences. Perhaps you've worked in retail, for example, and are aware of the changes that are impacting businesses such as Myer Holdings Limited (ASX: MYR), making you inclined to avoid them.
Other industries that have struggled in recent years include mining and mining services, while airlines typically make for bad investments as well.
Stocks to buy
Thus, there are plenty of ways to narrow down your search for new investment ideas. Sticking with companies you know or are familiar with is also smart, which helps to focus your search even further.
Reading through broker reports and upgrades are another way to get new ideas, together with reading through company updates on the ASX website.
Of course, there is no sure-fire way to find new winning investment ideas: some you will stumble upon by chance while others can take days or even weeks of research.
For an idea of what many other investors have been investing in recently, Al Bentley, CEO and founder of Simply Wall St, recently noted on the ASX website the top 10 shares Australian users have invested in over the last three months. Not surprisingly, many of them are names that most Australians are very familiar with…
| Company | Market Cap ($billion) | Recent Share Price |
| Commonwealth Bank of Australia (ASX: CBA) | 134.1 | $78.41 |
| Northern Star Resources Ltd (ASX: NST) | 2.91 | $4.84 |
| Telstra Corporation Ltd (ASX: TLS) | 68.98 | $5.65 |
| a2 Milk Company Ltd (Australia) (ASX: A2M) | 1.48 | $1.92 |
| Metals X Limited (ASX: MLX) | 1.03 | $1.745 |
| Woolworths Limited (ASX: WOW) | 29.6 | $23.20 |
| Bellamy's Australia Ltd (ASX: BAL) | $1.31 | $13.60 |
| Australia and New Zealand Banking Group (ASX: ANZ) | 76.79 | $26.44 |
| Flight Centre Travel Group Ltd (ASX: FLT) | 3.36 | $33.32 |
| BHP Billiton Limited (ASX: BHP) | 109.54 | $20.59 |
Data provided by S&P Global Market Intelligence
The shares in that list can be found in the Simply Wall Street portfolio. Of course, just because these shares are popular among other investors doesn't automatically make them a buy. In fact, following the investing crowd too much can result in sub-par returns in the long-run – especially when you buy in later than most others.
That said, however, I do particularly like a2 Milk and Bellamy's, which both produce infant formula and stand to benefit from growing demand both in Australia and in China.
Telstra Corporation is another great business and one that dividend investors ought to take a closer look at, while Flight Centre could also be a business worth your attention.
The banks, on the other hand, I'd be inclined to avoid. Although their shares have retreated in price since the highs they achieved in 2015, they are still facing a number of headwinds which could drag their shares (and dividends) lower over the coming years.
Same goes for the miners. BHP and Northern Star Resources have surged in price in recent months, but both rely on higher resource prices – especially iron ore, petroleum and, in Northern Star Resources' case, gold.
