With over 1,000 companies on Aim it is simply not practical to thoroughly analyse each and every single constituent on the pages of the IC over the course of a year. This long tail of very small companies on the junior market is under-researched by the City, which means earnings forecasts are often conspicuous by their absence – as if valuing growth companies wasn’t hard enough. Nor are many such shares investible, on the basis of poor liquidity and small free floats – the latter a factor that leaves many such tiddlers at the mercy of being taken private against the wishes of smaller shareholders.
That’s not to say we neglect the smaller end of Aim entirely – it’s proved a mostly happy hunting ground for Simon Thompson, and our companies writers are always on the lookout for small, innovative companies within their sectors; in fact, we’ve tipped two companies outside of the Aim 100 this week.
However, the fundamental approach to stockpicking we prefer to take means we focus our efforts at the large end of the junior market where research coverage is more plentiful, and in particular the 174 Aim-traded shares whose equity is valued at more than £100m. According to the March figures from the London Stock Exchange, those companies are worth a combined £51bn – a massive 70 per cent of Aim’s total market capitalisation concentrated in just 16 per cent of its constituents.