Woolworths Limited (ASX: WOW) shares, Transurban Group (ASX: TCL) shares and Qantas Airways Limited (ASX: QAN) shares are not on my buy list.
'Avoidance' is better than buying
One of my favourite investing quotes comes from a former US Motley Fool writer, Morgan Housel, who titled a column:
"99% of Long-Term Investing Is Doing Nothing; the Other 1% Will Change Your Life".
What we don't do in investing is more important than what we do.
Despite having over 2,000 companies on the ASX, over a lifetime, I believe investors need only find one or two dozen good businesses to generate long-term wealth.
After making too many 'buy now, ask questions later' investments on the sharemarket, I'm choosing to completely avoid some companies and industries altogether.
Here's why I'm avoiding these three companies right now.
Woolworths
I think Woolworths shares are around fair value, based on the assumption of a stabilisation in profit margins from its core supermarkets business. However, I also think there are key risks to the downside, including online competition and pressure from Aldi and Coles – owned by Wesfarmers Ltd (ASX: WES).
Transurban
Transurban, the owner of Citylink, Hills M2 and other fantastic toll road assets is a good business. It has valuable defensive qualities and pays a steady dividend. However, I think the company is close to fully valued, with rising global interest rates a key downside risk.
While I can understand its appeal to income-focused investors, I'd prefer to buy smaller less interest rate sensitive dividend shares for my portfolio.
Qantas
Qantas is a decent business in a crappy industry. To steal a quote and paraphrase, the only way to become a millionaire in the airline industry is to start as a billionaire.
Qantas has staged an impressive recovery over the past five years, with favourable oil prices boosting earnings. However, airline businesses have poor economics, including high capital requirements and intense competition.
Foolish Takeaway
I'm not keen to label these businesses as a 'buy', 'hold' or 'sell' because the reasons I'm avoiding them are personal. I held Woolworths shares not too long ago, but I did poorly from my investment and sold out — only to see its share price rebound slightly.
However, with over 2,000 other shares on the ASX, I know I'm not compelled to buy these shares right now.
