The Aim 100 2022: Part 1

The performance of the Aim 100 index is right down there with the highest-profile strugglers of 2022 such as the tech-driven Nasdaq. Like Nasdaq, Aim was coming off a period of considerable outperformance. But at the time of writing, both had fallen more than 30 per cent year to date, with the Aim 100’s 37 per cent drop ranking it below its US peer.

The fundamental reason for both indices’ slump is the same: high-growth companies have come under severe pressure this year as rising interest rates mean the present value of future cash flows is discounted much more heavily. Higher costs and uncertain end markets have merely added to the pain.

In the UK, Aim’s travails have been particularly stark because of how it contrasts with the mainstream UK indices. The FTSE 100 is down just 7.2 per cent this year in share price terms, buoyed (relatively speaking) by its outsize weighting to oil and gas stocks that have benefited from elevated commodities prices. That in turn has helped limit the FTSE All-Share’s decline to just 10.8 per cent. On a total return basis, the FTSE 100 is down just 2.5 per cent.

 

As the first half of our top 100 rundown shows, the alternative market has its fair share of energy companies. But they don’t account for such a large proportion of the index as they do in the FTSE, and these companies' ability to turn a profit from natural resources isn’t always guaranteed.

Such is life for businesses on Aim: whether they focus on technology, healthcare, oil & gas or other parts of the market, companies from across the index promise big things. That creates the opportunity for high rewards; the flipside is the risks are equally high.

But this isn’t simply a story of fledgling failures. It’s notable that the Aim 100 – comprised of the largest companies in the alternative market – has slightly underperformed even the Aim All-Share this year. That’s partly due to some high-profile blow-ups among the biggest stocks, from drink mixers maker Fevertree (FEVR) (7 per cent of the index at the start of 2022) to hydrogen hopeful ITM Power (ITM) (4.2 per cent). But it might also have something to do with the structural incentives behind buying and selling activity.

Aim is not just a favoured hunting ground for retail investors in search of decent returns and inheritance tax (IHT) breaks. It’s also popular among wealth managers who offer dedicated Aim IHT portfolios to clients. Seeking strength in numbers, these institutional buyers gravitate towards the biggest stocks. That creates a powerful share price driver on the way up, but can also worsen the selling when a company falls from favour.

This headwind is likely to remain an issue for shares whose momentum has taken a turn for the worse. But it doesn’t answer the fundamental question of whether better value can now be found among Aim’s biggest constituents – and whether that value is worth capitalising on.

At a superficial level, it’s clear the index is much cheaper than it was: per FactSet, the price/earnings ratio for the Aim 100 has dropped from 61 times at the start of the year to 27 times as of mid-October. The earnings part of that equation is going to face further challenges: we noted in August that companies remained relatively bullish, but the outlook has darkened further since then, and it won't only be Aim's retail-focused businesses that come under pressure. 

At the same time, there are reasons for optimism. The dearth of initial public offerings on the bourse this year underlines what a difficult time it's been for sentiment. But takeovers haven't suffered to the same extent: deals for the likes of Ideagen and Emis Group (EMIS) show the appetite for acquisitions remains.

We have excluded Emis from our top 100 as a result of its imminent delisting. That decision, alongside the acquisition of social care company CareTech (completed earlier this month), creates space for two tech businesses whose share prices have bucked the trend this year, pushing them into the ranks of the 100 largest Aim businesses by market capitalisation.

But Aim is not just a breeding ground for innovative businesses: it is also a place for companies to show they can deliver on their early potential. The second half of this countdown, published in next week's issue, will examine the index's largest companies in more detail.

 

 

 

Rank	Name	Ticker	Price (p)	Market cap (£mn)	Forward PE	1-year simple return (%)	1-year total return (%)	Sector	2021 ranking
100	Wandisco	WAND	450	297.9	-	31.2	31.2	IT Services	Re-entry
99	Cerillion	CER	1,120.0	332.0	29.8	38.9	39.8	Packaged Software	New
98	Revolution Beauty	REVB	19	58.9	-	-	-	Financial Conglomerates	75
97	Naked Wines	WINE	111.5	81.4	16.4	-83.1	-83.1	Beverages: Alcoholic	63
96	Gooch & Housego	GHH	480	120.6	12.6	-60.2	-61.2	Electronic Components	93
95	Inspecs	SPEC	115.0	116.9	7.0	-69.7	-69.4	Financial Conglomerates	82
94	Eurasia Mining	EUA	4.8	135.5	-	-79.2	-79.2	Other Metals/Minerals	53
93	Hotel Chocolat	HOTC	130	184	18.1	-72.1	-72.1	Food: Specialty/Candy	67
92	LBG Media	LBG	59.8	123.3	9.7	-	-	Commercial Printing/Forms	New
91	James Latham	LTHM	1,085.0	218.5	#N/A	-6.4	-3.5	Wholesale Distributors	New
90	Accesso Technology	ACSO	620.0	260.4	28.2	-26.7	-26.7	Packaged Software	Re-entry
89	Tinybuild	TBLD	112.5	229.3	12.7	-45.4	-45.4	Packaged Software	68
88	Boku	BOKU	125.0	372.7	32.4	-30.6	-30.6	Packaged Software	58
87	Seeing Machines	SEE	7.1	289.9	#N/A	-29.5	-29.5	Auto Parts: OEM	90
86	Dotdigital	DOTD	77.0	231.4	20.4	-68.8	-68.5	Packaged Software	41
85	Sigmaroc	SRC	43.0	269.3	6.3	-56.5	-56.5	Construction Materials	New
84	Numis	NUM	175.0	194.3	10.0	-49.3	-45.2	Investment Banks/Brokers	84
83	AB Dynamics	ABDP	1,442.5	327.8	28.1	-23.8	-23.5	Electronic Equipment/Instruments	81
82	Tracsis	TRCS	870.0	258.6	21.3	-6.5	-6.4	Packaged Software	Re-entry
81	Benchmark Holdings	BMK	37.5	261.9	-	-40.0	-40.0	Pharmaceuticals: Major	79
80	Avacta	AVCT	102.5	263.4	-	-16.8	-16.8	Miscellaneous Commercial Services	95
79	IQE	IQE	39.7	321.9	-	-12.9	-12.9	Semiconductors	88
78	i3 Energy	I3E	24.0	279.7	3.0	89.1	98.5	Oil & Gas Production	New
77	Lok'N Store	LOK	775.0	232.6	25.4	-6.4	-4.5	Other Transportation	New
76	Idox	IDOX	61.2	276.1	21.9	-13.9	-13.4	Packaged Software	94
75	Elixirr International	ELIX	540.0	249.4	16.5	-23.9	-23.4	Miscellaneous Commercial Services	New
74	Strix	KETL	99.3	220.5	7.0	-63.4	-60.4	Electronic Equipment/Instruments	44
73	Gresham House	GHE	730.0	279.4	12.6	-15.1	-14.0	Investment Trusts/Mutual Funds	New
72	Atalaya Mining	ATYM	261.0	359.5	7.7	-35.3	-27.1	Other Metals/Minerals	78
71	Life Science Reit	LABS	74.0	259.0	27.4	-	-	Real Estate Investment Trusts	New
70	Jadestone Energy	JSE	69.6	319.2	2.1	-20.9	-19.0	Integrated Oil	91
69	CentralNic	CNIC	129.0	369.5	7.4	-5.1	-5.1	Advertising/Marketing Services	New
68	Mattioli Woods	MTW	590.0	301.9	11.4	-26.3	-23.0	Miscellaneous Commercial Services	Re-entry
67	R&Q Insurance	RQIH	73.5	277.4	-	-58.8	-58.8	Specialty Insurance	59
66	Devolver Digital	DEVO	71.5	316.2	17.6	-	-	Packaged Software	New
65	Brooks Macdonald	BRK	1,925.0	312.0	13.4	-28.2	-25.5	Investment Managers	87
64	Jubilee Metals	JLP	11.4	328.9	6.2	-29.9	-29.9	Other Metals/Minerals	83
63	Young & Co's Brewery	YNGA	916.0	456.8	15.1	-38.5	-37.3	Restaurants	65
62	Petrotal	PTAL	44.0	373.1	1.6	80.2	80.2	Oil & Gas Production	New
61	Nicols	NICL	1,100.0	401.2	20.3	-8.3	-6.2	Beverages: Non-Alcoholic	69
60	FRP Advisory	FRP	155.5	387.1	19.8	25.9	29.4	Miscellaneous Commercial Services	98
59	Savannah Energy	SAVE	25.9	345.5	2.3	36.7	36.7	Integrated Oil	Re-entry
58	Greatland Gold	GGP	8.3	417.7	-	-51.7	-51.7	Precious Metals	54
57	Pan African Resources	PAF	16.4	368.1	4.3	-3.7	1.2	Precious Metals	97
56	FW Thorpe	TFW	397.5	465.8	-	-4.4	-2.0	Electrical Products	66
55	Central Asia Metals	CAML	219.0	395.0	6.4	-10.7	-1.6	Other Metals/Minerals	80
54	Alliance Pharma	APH	61.9	336.3	9.3	-38.9	-37.3	Pharmaceuticals: Major	60
53	Johnson Service Group	JSG	84.0	368.6	11.8	-37.0	-36.4	Miscellaneous Commercial Services	48
52	Kistos	KIST	400.0	331.5	2.8	0.0	0.0	Oil & Gas Production	New
51	Volex	VLX	247.0	388.2	9.4	-45.7	-44.9	Electrical Products	45

Source: FactSet. Aim 100 ranking as of 15 Sep 2022, price data accurate as of 24 Oct 2022