2 shares to buy and 2 shares to avoid for smart investors

The Australian share market is filled with a number of quality shares for investors to choose from. It is also filled with some that I feel investors should avoid. Deciding correctly on which to buy and which to avoid can be the difference between your portfolio performing above and below your expectations.

I have picked out two shares which I think investors should consider buying and two shares which I believe investors should look to avoid.

Cabcharge Australia Limited (ASX: CAB)Avoid

Until Uber arrived on Australian shores, Cabcharge had a near-monopoly on the Australian taxi industry. But as Uber grows relentlessly in Australia, Cabcharge has seen its revenue begin to decline. In its 2015 full-year results the company reported a 16.6% slide in net profit to $47 million as revenue slipped 4.7% to $188 million for the year. Its shares are priced at just 9 times estimated forward earnings, making them extremely cheap. But despite this I feel they are best avoided.

Flight Centre Travel Group Ltd (ASX: FLT)Buy

There is no stopping Flight Centre which keeps going from strength to strength. Its half-year results were as impressive as its future growth prospects. Expansion in China is perhaps the most exciting prospect for the company’s shareholders at present. Chinese outbound tourism grew to 120 million people in 2015 and growth looks set to continue in 2016. If Flight Centre can capture even a small market share it will be a huge boost to the top line. For this reason I believe Flight Centre should be considered a buy.

Retail Food Group Limited (ASX: RFG)Buy

There’s a lot to love about Retail Food Group. The owner of franchise brands such as Gloria Jean’s, Donut King, and Michel’s Patisserie has forecast earnings growth of 20% in 2016. This forecast is supported by the rapidly expanding store network. The company plans to open 250 new stores before the end of the 2016 financial year. I believe this growth and its market-beating dividend make Retail Food Group a buy today.

Treasury Wine Estates Ltd (ASX: TWE)Avoid

Treasury Wine is a great company, but at the current price I would avoid it. The shares are currently priced at 33 times estimated forward earnings, which I feel is just a little too expensive. With the Australian dollar rising, there is a danger it could put pressure on the company’s exports and stifle earnings growth. Trading at such a high multiple means that should it fail to live up to market expectations the shares could come tumbling down.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Retail Food Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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