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Why I’m avoiding these ASX shares

I’m a positive person and tend to focus more on the shares I want to buy than the shares that I want to avoid.

But to mix things up a little I thought I would pick out a couple of shares that I’m not prepared to buy at this point and explain why. They are as follows:

Myer Holdings Ltd (ASX: MYR)

Although I haven’t stepped foot inside one of its department stores for years, I have happily used this retailer’s online store many times over the last few months. But unfortunately, its online segment is still only a very small part of its overall business (5.5% of sales in Q3) and is unlikely to offset the weakness in its bricks and mortar segment any time soon.

If the company had put more emphasis on its online store a decade ago then things could have been very different today. But because it didn’t, I feel that overall sales are likely to continue to decline over the coming years as its department stores struggle for relevance.

I would consider retail shares such as Kogan.com Ltd (ASX: KGN) or Lovisa Holdings Ltd (ASX: LOV) instead.

Ramsay Health Care Limited (ASX: RHC)

This leading private hospital operator is undoubtedly one of the highest quality businesses in Australia in my opinion. However, due to issues outside of its control I’m not a buyer of its shares right now. As well as suffering from weakness in its UK and France businesses, on home soil things are not looking great.

Private hospital insurance coverage recently fell to its lowest level since June 2011 due largely to affordability issues and I don’t see the situation changing any time soon. As such, I feel it is inevitable that Ramsay’s Australian hospitals will soon be impacted by the structural slowdown in the industry. With its shares changing hands at almost 25x trailing earnings, I struggle to see how it will deliver strong enough growth over the medium term to justify the premium.

I would consider healthcare shares such as CSL Limited (ASX: CSL) or Resmed Inc (ASX: RMD) instead.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Kogan.com ltd, Ramsay Health Care Limited, and ResMed Inc. 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.

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