2 ASX shares to buy and 2 to avoid

At the current BHP Billiton Limited (ASX: BHP) share price and SEEK Limited (ASX: SEK) share price, I’d rather buy Blackmores Limited (ASX: BKL) shares and Telstra Corporation Ltd (ASX: TLS) shares.

2 ASX shares I’m avoiding

I’m avoiding BHP Billiton shares at today’s prices because I think their recent rally won’t continue and the outlook for a number of its products is highly uncertain. BHP’s key products are iron ore, copper, oil and coal. The price of iron ore, for example, has rallied over 100% in the past year thanks to China’s ongoing infrastructure spending. I think the level of demand is unsustainable and market prices could retreat in the near future.

SEEK has proven to be a great business, with a striding share price. However, I think shares in the employment classifieds business are expensive given the risk of competition. With LinkedIn growing and other competitors emerging, I’d like to pay a lower price than what we are being offered today.

2 ASX shares to consider buying

At today’s prices, I’m taking a closer look at Telstra shares. Shares in the telecommunications heavyweight have fallen 11% in a year to trade around $4.60. However, there are many reasons to consider owning shares in the company.

Firstly, it’s got a handy dividend. If in the next 12 months it pays a dividend of 31 cents per share, as analysts expect, it trades on a dividend yield of 6.7% fully franked. That’s around 9.5% grossed up. Secondly, Telstra could offer decent growth over the long-term. While I wouldn’t expect it to shoot the lights out, if it kept falling to around $4 per share (around 13% below today’s price) then I would likely pick up a few shares for my portfolio.

Finally, I’d consider holding Blackmores shares. Like Telstra but worse, Blackmores has suffered a 36% selloff over the past year. The catalyst behind the steep fall was slowing growth and changes to the distribution of its products in China. However, at today’s prices, Blackmores shares are arguably much better value. They also offer a forecast dividend of 2.9%.

Foolish Takeaway

I think BHP and Seek are well-run businesses but at today’s prices, there are better alternatives. I would take Telstra over BHP. And although I think Blackmores is a higher-risk investment idea, it could be worth a punt at these levels.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of LinkedIn. The Motley Fool Australia has no position in any of the stocks mentioned. 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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