It has been a tough year for investors in the Alternative Investment Market, better known as Aim. Since a recent peak at the end of the first quarter of 2014, the Aim All-Share index – which measures the performance of its entire constituent base rather than the top 100 companies we cover in this two-part feature – has shed 17 per cent of its value. It has, of course, been a period of underperformance for small-cap indices generally, but Aim has had the worst of it; over the same period the FTSE Small Cap index actually rose 2 per cent.
There is, of course, an obvious culprit for this weakness: the plunging prices of commodities, to which Aim is especially exposed. Oil and metals of both the precious and industrial varieties have seen their prices slump over the past year or so, undermining the investment case for the many members of Aim involved in their discovery and extraction. As the chart shows (see right), the market’s oil and gas sector has closely tracked the price of crude over five years.
What the charts also show is that this weakness has, in fact, been inherent for some time. And if we compare the performance of the resources sectors to Aim as a whole, it is clear that its overall performance has been badly scarred by the commodity crunch. There are more Aim resource-focused shares today than there were at the market’s peak in 2011 – 260 versus 247 – but their value has been trimmed significantly, collapsing from £37.4bn to £8.1bn over the period.
So is it time to give up on Aim? We don’t think so. While its aggregate performance isn’t impressive, tracking Aim’s performance as an index per se rather misses its point. Aim’s primary purpose is, after all, to provide companies at a comparatively early stage of development with access to capital to fund further growth. Many of these companies will subsequently fail to deliver against overambitious projections placed upon them; at the extreme, some will misappropriate the looser listing requirements Aim rightly offers to their investors’ detriment – a fact that has attracted voracious short sellers and critics of its model alike this year.
A select few will vastly exceed expectations, though – it is often said that Aim is a stockpickers’ market, and many small-cap fund managers have indeed found it a happy hunting ground full of quality companies with great potential, including greats such as Neil Woodford and Gervais Williams. And although scandal attracts the spotlight, the vast majority of the junior market’s constituents exercise corporate governance every bit as well run as those on London’s main boards.
And if we were to look for a silver lining in the resources sell-off it is that Aim is a much more broad-based index today than it was only a few years ago – the proportion of the market’s value accounted for by resource stocks has fallen from a massive 46 per cent in 2011 to only 11 per cent today. Certainly, while mining and oil-focused equities may have lost a staggering £29bn in just four years, the overall market has shrunk by ‘just’ £9.9bn, to a total value of £72bn, thanks to the creation of value in other segments of the market. Notable performers have been the market’s consumer goods, services and healthcare sectors, which have grown in value by 76 per cent, 78 per cent and 108 per cent, respectively. Aim certainly no longer deserves its reputation as a haven for commodity speculators.
London’s junior market will be 20 years old this year, and has much cause for celebration as a nursery for the kind of innovative growth companies it is often bemoaned the UK does not produce. When Aim was launched in 1995 it had just 10 members. Today it has nearly 1,100, and in that respect, given the jobs is has created, Aim is as much an economic success as an investment one, and fully merits the tax breaks that accompany it.
Investors, meanwhile, should look beyond the occasional disappointment and cheer the wealth of opportunity the junior market brings. Whether it be developers of exciting technology or healthcare solutions, those bringing innovation to everyday business problems or new products to consumers, or long-established dividend payers ploughing a steady furrow, Aim’s top 100 companies offer something for everyone. Click on the links below to read our review in full.
100-91: Ithaca Energy to DX Group
90-81: Fusionex International to Central Asia Metals
80-71: Horizon Discovery to Oakley
60-51: Faroe Petroleum to Telford Homes
50-41: Staffline to Sirius Real Estate
40-31: Patisserie to Smart Metering Systems
20-11: Safecharge International to Secure Trust Bank
The Aim 100: 100 to 51
Rank | Name | Ticker | Price (p) | 1-year change (%) | Market cap (£m) | Forecast PE (X) | Dividend yield (%) | Industry group |
---|---|---|---|---|---|---|---|---|
51 | Telford Homes | Tef | 433.5 | 30.2 | 261 | 14.1 | 2.4 | Home Construction |
52 | Pacific All.China Land | Pacl | 2.02 | 19 | 210 | na | 0 | Real Estate Hold, Dev |
53 | MP Evans | Mpe | 394 | -11.5 | 218 | 12.9 | 2.1 | Farm Fish Plantation |
54 | Johnson Service | Jsg | 76.5 | 34.2 | 230 | 13.9 | 2.2 | Business Support Svs. |
55 | Nanoco | Nano | 113 | 16.5 | 246 | na | 0 | Semiconductors |
56 | Iomart | Iom | 208 | -18.5 | 222 | 16.6 | 0.8 | Internet |
57 | Pan African Resources | Paf | 11.5 | -24.6 | 211 | 13.7 | 7.1 | Gold Mining |
58 | Benchmark Holdings | Bmk | 105.5 | 19.2 | 231 | 25.6 | 0 | Biotechnology |
59 | GB Group | Gbg | 179 | 23.5 | 216 | 28.6 | 0.9 | Computer Services |
60 | Faroe Petroleum | Fpm | 86.5 | -36.9 | 232 | na | 0 | Exploration & Prod. |
61 | Scapa | Scpa | 162.75 | 40.3 | 240 | 19.6 | 0.6 | Speciality Chemicals |
62 | Manx Telecom | Manx | 187 | 15.8 | 211 | 14.9 | 1.8 | Fixed Line Telecom. |
63 | Arbuthnot Banking | Arbb | 1571 | 32.3 | 234 | 14.5 | 1.7 | Speciality Finance |
64 | Majestic Wine | Mjw | 362 | -18.1 | 238 | 13.8 | 4.4 | Speciality Retailers |
65 | Earthport | Epo | 47 | 1.1 | 224 | na | 0 | Internet |
66 | Redcentric | Rcn | 140.25 | 20.9 | 203 | 16.3 | 1.4 | Computer Services |
67 | Vernalis | Ver | 46.5 | 29.6 | 206 | na | 0 | Biotechnology |
68 | Brooks Macdonald | Brk | 1493 | -13.4 | 203 | 16.5 | 1.9 | Asset Managers |
69 | Restore | Rst | 234 | 23.2 | 192 | 14.8 | 1 | Business Support Svs. |
70 | Globo | Gbo | 47.25 | 11.8 | 177 | 8.4 | 0 | Software |
71 | Oakley Capital Invs. | Ocl | 173 | -0.6 | 203 | na | 0 | Investment Trusts |
72 | Vertu Motors | Vtu | 55.25 | -7.9 | 188 | 11.2 | 1.5 | Speciality Retailers |
73 | Velocys | Vls | 122 | -17.6 | 173 | na | 0 | Oil Equip. & Services |
74 | Sinclair Pharma | Sph | 41 | 34.4 | 204 | 28.8 | 0 | Pharmaceuticals |
75 | Tungsten Corporation | Tung | 186.25 | -14.2 | 193 | na | 0 | Speciality Finance |
76 | SQS Sftw.quality Sys. | Sqs | 607.5 | 6.9 | 186 | 17.1 | 1.6 | Computer Services |
77 | Rockhopper Exploration | Rkh | 64.25 | -34.3 | 188 | na | 0 | Exploration & Prod. |
78 | Rm2 International | Rm2 | 59 | -15.7 | 191 | na | 0 | Containers & Package |
79 | Thorpe (FW) | Thrp | 155 | 14.8 | 179 | na | 2.1 | Electrical Equipment |
80 | Horizon Discovery | Hzd | 211 | 6.8 | 169 | na | 0 | Biotechnology |
81 | Central Asia Metals | Caml | 166 | -7.8 | 185 | 7.3 | 6 | General Mining |
82 | Sirius Minerals | Sxx | 13 | 26.8 | 280 | na | 0 | General Mining |
83 | Gooch And Housego | Ghh | 707.5 | 6.3 | 169 | 18 | 1 | Electrical Equipment |
84 | Renew Holdings | Rnwh | 240.5 | 2.6 | 148 | 9.7 | 2.1 | Business Support Svs. |
85 | Retroscreen Virology** | Rvg | 283.5 | -3.7 | 193 | na | 0 | Biotechnology |
86 | Personal Hdg. | Pgh | 555 | 15.8 | 168 | 18 | 3.6 | Insurance Brokers |
87 | Falkland Oil & Gas | Fogl | 29 | 19.6 | 155 | na | 0 | Exploration & Prod. |
88 | Greenko | Gko | 84.5 | -49.6 | 132 | 12 | 0 | Alt. Electricity |
89 | Regenersis | Rgs | 208.25 | -42.5 | 165 | 11.9 | 2.1 | Business Support Svs. |
90 | Fusionex International | Fxi | 355 | -34 | 153 | 37.9 | 0.6 | Software |
91 | DX Group | Dx. | 86.25 | -34 | 173 | 7.8 | 5.2 | Delivery Services |
92 | Plexus Holdings | Pos | 234.75 | -14.6 | 199 | 37.3 | 0.5 | Oil Equip. & Services |
93 | Conygar Investment Co. | Cic | 186 | 13.8 | 154 | 60.8 | 0.9 | Real Estate Hold, Dev |
94 | Dolphin Capital Invrs. | Dci | 25 | -34.2 | 161 | na | 0 | Investment Trusts |
95 | Sprue Aegis | Sprp | 327.5 | 61.7 | 149 | 16.2 | 2.7 | Electrical Equipment |
96 | Jelf | Jlf | 176.5 | 41.2 | 151 | 17.5 | 1.1 | Speciality Finance |
97 | Utilitywise | Utw | 205 | -32.8 | 153 | 11.6 | 1.9 | Business Support Svs. |
98 | Hargreaves Services | Hsp | 439.5 | -46.7 | 141 | 4.5 | 6.1 | Business Support Svs. |
99 | Tissue Regenix | Trx | 14.75 | -48.7 | 112 | na | 0 | Biotechnology |
100 | Ithaca Energy | Iae | 47.75 | -65.7 | 157 | 37 | 0 | Exploration & Prod |
Source: Datastream, price data correct as of 15 Apr 2015, ranking correct as of 24 Mar 2015. **Prior to name change to hVIVO |