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The Aim 100 2015: Part 1 intro

Aim has had a tough year due to falling commodity prices, but it now looks a more balanced market
April 17, 2015

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

70-61: Globo to Scapa

60-51: Faroe Petroleum to Telford Homes

50-41: Staffline to Sirius Real Estate

40-31: Patisserie to Smart Metering Systems

30-21: CVS to Monitise

20-11: Safecharge International to Secure Trust Bank

10-1: EMIS to Asos

Part 2 intro

 

The Aim 100: 100 to 51

RankNameTickerPrice (p)1-year change (%)Market cap (£m)Forecast PE (X)Dividend yield (%)Industry group
51Telford HomesTef433.530.226114.12.4Home Construction
52Pacific All.China LandPacl2.0219210na0Real Estate Hold, Dev
53MP Evans Mpe394-11.521812.92.1Farm Fish Plantation
54Johnson Service Jsg76.534.223013.92.2Business Support Svs.
55Nanoco Nano11316.5246na0Semiconductors
56Iomart Iom208-18.522216.60.8Internet
57Pan African ResourcesPaf11.5-24.621113.77.1Gold Mining
58Benchmark HoldingsBmk105.519.223125.60Biotechnology
59GB GroupGbg17923.521628.60.9Computer Services
60Faroe PetroleumFpm86.5-36.9232na0Exploration & Prod.
61Scapa Scpa162.7540.324019.60.6Speciality Chemicals
62Manx TelecomManx18715.821114.91.8Fixed Line Telecom.
63Arbuthnot Banking Arbb157132.323414.51.7Speciality Finance
64Majestic WineMjw362-18.123813.84.4Speciality Retailers
65EarthportEpo471.1224na0Internet
66RedcentricRcn140.2520.920316.31.4Computer Services
67VernalisVer46.529.6206na0Biotechnology
68Brooks Macdonald Brk1493-13.420316.51.9Asset Managers
69RestoreRst23423.219214.81Business Support Svs.
70GloboGbo47.2511.81778.40Software
71Oakley Capital Invs.Ocl173-0.6203na0Investment Trusts
72Vertu MotorsVtu55.25-7.918811.21.5Speciality Retailers
73VelocysVls122-17.6173na0Oil Equip. & Services
74Sinclair PharmaSph4134.420428.80Pharmaceuticals
75Tungsten CorporationTung186.25-14.2193na0Speciality Finance
76SQS Sftw.quality Sys.Sqs607.56.918617.11.6Computer Services
77Rockhopper ExplorationRkh64.25-34.3188na0Exploration & Prod.
78Rm2 InternationalRm259-15.7191na0Containers & Package
79Thorpe (FW)Thrp15514.8179na2.1Electrical Equipment
80Horizon Discovery Hzd2116.8169na0Biotechnology
81Central Asia MetalsCaml166-7.81857.36General Mining
82Sirius MineralsSxx1326.8280na0General Mining
83Gooch And HousegoGhh707.56.3169181Electrical Equipment
84Renew HoldingsRnwh240.52.61489.72.1Business Support Svs.
85Retroscreen Virology**Rvg283.5-3.7193na0Biotechnology
86Personal  Hdg.Pgh55515.8168183.6Insurance Brokers
87Falkland Oil & GasFogl2919.6155na0Exploration & Prod.
88Greenko Gko84.5-49.6132120Alt. Electricity
89RegenersisRgs208.25-42.516511.92.1Business Support Svs.
90Fusionex InternationalFxi355-3415337.90.6Software
91DX GroupDx.86.25-341737.85.2Delivery Services
92Plexus HoldingsPos234.75-14.619937.30.5Oil Equip. & Services
93Conygar Investment Co.Cic18613.815460.80.9Real Estate Hold, Dev
94Dolphin Capital Invrs.Dci25-34.2161na0Investment Trusts
95Sprue AegisSprp327.561.714916.22.7Electrical Equipment
96Jelf Jlf176.541.215117.51.1Speciality Finance
97UtilitywiseUtw205-32.815311.61.9Business Support Svs.
98Hargreaves ServicesHsp439.5-46.71414.56.1Business Support Svs.
99Tissue Regenix Trx14.75-48.7112na0Biotechnology
100Ithaca EnergyIae47.75-65.7157370Exploration & Prod
Source: Datastream, price data correct as of 15 Apr 2015, ranking correct as of 24 Mar 2015. **Prior to name change to hVIVO