MENU

3 popular ASX shares that I would avoid

After the recent market volatility brought about by global trade war concerns and fears over rising tensions in the Middle East, I think there are a good number of quality shares trading at attractive levels.

However, not all shares that have seen their share prices fall during this time are necessarily good value. Here are three shares that I would suggest investors continue to avoid:

Fortescue Metals Group Limited (ASX: FMG)

This iron ore miner has come under significant selling pressure over the last few months due to the widening discount that its low grade iron ore has faced. Whilst this has arguably left its shares trading at a dirt cheap price, I would suggest investors hold off an investment until there are signs that the discount has lessened or at least stabilised. In its last update Fortescue advised that the price commanded for its ore in the second-half of FY 2018 would be 62% of the price of the benchmark 62% fines. In the first-half Fortescue was receiving 68% of the benchmark price for its iron ore.

InvoCare Limited (ASX: IVC)

Whilst I am a big fan of this funeral provider’s business, I’m not at all a fan of its current share price. Even though its shares have just drifted to a 52-week low, they are still changing hands at approximately 21x estimated FY 2018 earnings. While I agree its defensive qualities and market leadership should justify a bit of a premium over the market average, I think this is being generous. Especially given its guidance for low single digit operating EBITDA growth and flat operating earnings per share in FY 2018. Furthermore, if the weak industry conditions that are being experienced in the UK develop here, then earnings could potentially go backwards in FY 2019.

Sigma Healthcare Ltd (ASX: SIG)

Sigma is a wholesaler and distributor of pharmaceutical products through the pharmacy and grocery sales channels. It is also the company behind the Amcal, Guardian, PharmaSave, and Chemist King pharmacy chains. Although its shares are priced at a lowly 13x trailing earnings at present, I fear this could be a value trap. Not only are conditions in the industry tough at the moment, but Sigma faces the loss of a major supply deal next year when its contract with Chemist Warehouse ends in June 2019. The loss of this contract could potentially create a large gap in its earnings.

While those shares are ones to avoid, in my opinion, these top growth shares are the ones to buy.

Top 3 Growth Shares To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.