28 Scottish AIM stocks - and lots to worry about

With the Scottish referendum on independence just days away, some investors may be wondering how Scottish listed stocks will be impacted if the Scots do vote “yes” for a break-up. While many are concerned, the outcome is very hard to predict. Even business bosses seem to be generally unsure of what independence would mean for their firms. So what should investors do?  

It has already been a gruelling year for investors in AIM quoted stocks, with the junior all-share index falling by 7.7% in the second quarter alone. But for the market’s 28-strong band of Scottish companies, the performance to July had actually been nowhere near as bad, down just 1.2% according to advisory firm BDO. But since the recent shock Yougov poll, these stocks have been heading South a lot more quickly - and it’s not just office relocations we’re talking about - with a 2% drop this week alone.

Given all this uncertainty, a rules-based approach to assessing Scottish stock investment traits ought to be more important then ever. So, rather than try and predict the implications for each of the “Scottish 28”, we’ve instead had a look at how they all currently score.

Using Stockopedia’s StockRanks we went hunting for the best, cheapest, leading stocks of the bunch (Highlands) and the expensive, deteriorating, junk (Haggis) by assessing their overall blend of quality, value and momentum factors.

Highlands or Haggis?

Data: Stockopedia, Company List: BDO

There can be only one…

Leading the list with a StockRank of 98 (out of a possible 100) is Berwickshire based potato farming business Produce Investments. Shares in the company have outperformed the AIM index by 12% over the past year. But with less than 20% of the stock in public hands, trading volumes are low and liquidity is a drag. But it’s the company’s value and quality factors that really catch the eye (see chart). Our own Paul Scott has suggested that, as a basic food producer, the cheap valuation may be down to the lack of excitement factor for investors.

In second place is Havelock Europa, which specialises in interior fit-outs of shops, banks and schools. The company was hit hard during the recession and its StockRank of 97 is a nod to indications that its financial strength is improving, as well as its apparently cheap valuation. Havelock has clients across the UK and abroad but in its latest results, chairman David MacLellan expressed hope that the economic recovery wouldn’t be destabilised by the outcome of the Scottish referendum.

With a StockRank of 96, hi-tech video security company Indigovision also scores well for its combination of quality, value and momentum. It has outperformed AIM by nearly 53% over the past year and its quality factors are are a major contributor to the high StockRank. In particular, the company has a track record of improving balance sheet strength (with an F-Score of 8 out of 9) and and its long term average return on capital 14.8% ranks well in the market. In August, chief executive Marcus Kneen was one of 130 business leaders who signed an open letter urging Scottish voters to reject independence.

Further down the list is Iomart, the cloud storage business, with a StockRank of 46. Iomart has been a popular share in recent years, surging from 100p to 315p in the 24 months to September 2013. On a number of measures it now looks expensive and achieves a ValueRank of just 24. Angus MacSween, the company’s chief executive, is an opponent of independence, telling a reporter at The Scotsman newspaper that it was “a very silly idea”. He added: “It’s fairly straightforward to move your registered office from Edinburgh to London. If that was the right thing for the business then that’s what we would do.”

Finally, towards the bottom of the list of our ‘Scottish 28’ is insulation maker Superglass Holdings. Paul Scott cast his eye over this share earlier this year and his concerns about the company have been borne out in deteriorating price momentum. With a StockRank of 16 Superglass scores badly on both its quality and momentum factors. However, its ValueRank has improved from 55 to 66 over the past three months, perhaps opening the door to bargain investors willing to bet the company can turn itself around.

Nessie where are you?

Whatever the outcome of next week’s referendum, the search for decent Scottish stocks needn’t be as futile as decades spent searching for the Loch Ness monster. Taking a portfolio approach and keeping a close eye on those with the best signs of value attraction, financial strength and momentum ought help to avoid the worst disasters.

You can read much more about how the StockRanks work here, as well as how they have performed over the past year, here. Subscribers to Stockopedia can check the StockRanks of every company in the market here. New to Stockopedia? Check out our Plans page and take a two-week free trial.