3 ASX shares I would avoid after the market meltdown

Whilst yesterday’s market crash means a good number of shares are now trading at cheaper prices, I wouldn’t necessarily be in a rush to buy them all.

Three shares that I would continue to avoid even after their recent declines are listed below. Here’s why I would avoid them:

Retail Food Group Limited (ASX: RFG)

This food and beverage company’s shares fell almost 4% on Tuesday, stretching its 12-month decline to over 71%. Despite this hefty drop I wouldn’t be in a rush to invest in its shares. I have concerns that the negative media coverage surrounding the company this year could have a hugely detrimental impact on its business performance in the future due to lower franchise sales and renewals. So although it looks extremely cheap, I think there’s a strong chance that it will eventually prove to be a value trap.

Wesfarmers Ltd (ASX: WES)

This conglomerate’s shares have fallen around 7% since the end of last week due largely to its disappointing update on the performance of its UK hardware expansion. This week Wesfarmers advised that its UK hardware segment would report a $1 billion impairment and $165 million operating loss during the first-half of FY 2018. Whilst management could yet turn things around, I fear its UK expansion is destined to be just as disastrous as the Masters misadventure by rival Woolworths Group Ltd (ASX: WOW).

Yowie Group Ltd (ASX: YOW)

This embattled chocolate company dropped lower yesterday, bringing its 12-month decline to over 74%. Whilst Yowie could potentially be cheap now, I have been alarmed at how often the company has missed its sales guidance over the last 12-24 months. I like companies that under-promise and over-deliver, whereas Yowie has been the exact opposite. But as well as this, I just don’t see the appeal of the Yowie product in a market flooded with confectionary with much stronger brand appeal.

Whilst I would avoid the shares listed above, I would consider fighting to get hold of these top shares today.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Retail Food Group Limited and Wesfarmers 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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