The Best of AIM, the Worst of AIM

Thursday, May 29 2014 by
16
The Best of AIM the Worst of AIM

The Alternative Investment Market (AIM) is seen by many as a hunting ground for stocks that can generate vast returns. These are the types of fast-growth small-caps that ex-Fidelity fund manager Peter Lynch once called 10-baggers. Over the past five years they’ve included the likes of Judges Scientific, Walker Greenbank and ASOS. But despite these successes, many AIM companies are hugely speculative, pre-earnings ‘story’ stocks. That means they often go on to disappoint their shareholders. Last weekend we helped The Telegraph track down some of the best and worst quality shares that AIM currently has to offer. This is what we found...

Many investors look in the wrong place

Changes to tax rules last year made it much more appealing for investors to trade AIM stocks. But while their allure might have grown, our research shows that many investors go about finding the best AIM shares in completely the wrong way. A general rule in the stock market is that good, cheap companies tend to outperform expensive, speculative companies. But if you look at this bubble chart - it shows that the most discussed AIM stocks on bulletin boards have a completely different profile to what works.  

Focus on Quality and Value

Good quality, attractively priced companies were precisely what hedge fund manager Joel Greenblatt set out to find when he devised his Magic Formula in ‘The Little Book that Beats the Market’. His system ranks companies using just two metrics - return on capital (good) and earnings yield (cheap) - to find those with the best combination of both.

Stockopedia’s StockRanks take these ideas even further by ranking shares not only for their quality and value but also their ‘momentum’. Many studies have shown that adding share momentum to a value investing approach has historically reduced risk and improved the consistency of returns.

The aim is to highlight good, cheap and improving stocks, while shunning speculative, expensive, deteriorating stocks. The results since we launched the rankings a year ago have been quite eye-catching - with the top 20% of stocks above a £20 million market cap returning 34% while the bottom 20% returning a negative 16%. Please do join our StockRanks webinar next Wednesday to learn more.

Finding the best of AIM

Using these quality and value principles, we put together a pair of stock…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way

Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


Do you like this Post?
Yes
No
16 thumbs up
0 thumbs down
Share this post with friends



Fireangel Safety Technology Group plc, formerly Sprue Aegis plc, is engaged in the business of design, sale and marketing of smoke and carbon monoxide (CO) detectors and accessories. The Company also operates its own CO sensor manufacturing facility in Canada. The Company is also a provider of home safety products. The Company's principal products include smoke alarms and CO alarms and accessories. Sprue manufactures CO sensors for use in all its CO alarms. Sprue serves in the United Kingdom retail and the United Kingdom's fire and rescue services. The Company offers a range of brands, including FireAngel, AngelEye, Pace Sensors, First Alert, SONA, BRK and Dicon brands. The Company's subsidiaries include Sprue Safety Products Limited, which is engaged in distribution of smoke and CO alarms, and Pace Sensors Limited, which is a manufacturer of CO sensors. more »

LSE Price
53.5p
Change
 
Mkt Cap (£m)
24.6
P/E (fwd)
30.9
Yield (fwd)
n/a

Staffline Group plc is a holding company, which is engaged in the provision of recruitment and outsourced human resource services to industry and services in the welfare to work arena and skills training. The Company has two segments: Staffing Services, which includes the provision of temporary staff to customers, and PeoplePlus, which includes the provision of welfare to work and other training services. Its Staffing Services focuses on providing complete labor solutions in agriculture, food processing, manufacturing, e-retail, driving and the logistics sectors. Its recruitment business operates from well over 300 locations in the United Kingdom, Eire and Poland. The Staffing brands include Staffline OnSite, based on clients' premises providing both blue and white collar, out-sourced, temporary workforces. Its Employability includes work program, prime contractor in over nine regions and sub-contracts in approximately five regions in England. more »

LSE Price
1186p
Change
0.3%
Mkt Cap (£m)
331.4
P/E (fwd)
9.7
Yield (fwd)
2.4

Andrews Sykes Group plc is engaged in hiring, selling and installing of a range of equipment, including pumping, portable heating, air conditioning, drying and ventilation equipment. The Company's segments include Hire and sales Europe, and Hire and sales Middle East, and Installation. It operates in the United Kingdom, Europe (The Netherlands, Belgium, Italy, France and Switzerland) and the United Arab Emirates, providing the hire and sale of environmental control equipment. It also installs fixed air conditioning equipment within the United Kingdom. The Company is also engaged in rental of Specialist Climate Control products, which include Air Conditioning and Chillers, Heating and Boilers, Dehumidifiers and Ventilation, along with a range of pumping equipment. In addition to renting its products, it provides its equipment for sale along with service and repair back up. In the United Kingdom, it has a specialist Air Conditioning installation, service and maintenance subsidiary. more »

LSE Price
530p
Change
 
Mkt Cap (£m)
223.5
P/E (fwd)
n/a
Yield (fwd)
n/a



  Is LON:SPRP fundamentally strong or weak? Find out More »


13 Comments on this Article show/hide all

ACounsell 29th May '14 1 of 13

Not sure about the bubble chart as a guide. Interestingly Blinkx and Plus 500 are in virtually the same position on the chart yet their performance has been diametrically opposite YTD. Plus 500 is up about 73% and Blinkx is down by about 63%. I look forward to the 'add on' on institutional buying/selling, insider activity and short selling that was previewed in a webinar recently. Overlaying that sort of information, particularly short selling, might highlight how these apparently similarly ranked shares are likely to perform in very different ways.

| Link | Share | 1 reply
Edward Croft 29th May '14 2 of 13
3

In reply to post #83677

Andrew... the important thing to understand about the StockRanks (which generate the bubble charts) is that they are designed to be used to construct portfolios. When picking individual stocks there is a wide variability of returns, as you show with BLNX and Plus 500, but a portfolio of 15 or 20 of higher ranked stocks has performed more consistently over the last year. Individual shares have very idiosyncratic performances - that's why we always preach to use wide diversification.

The performance chart of the StockRanks since inception in the article above shows that it's been the good, cheap, improving stocks which have performed the best over the last year. Within that mix of course there are many that have done wonderfully and many that have done dreadfully, but the portfolio mix has outperformed well as there have been more good performers than bad. It's all about the batting average.

We'll be publishing more stats from the last year in next Wednesday's webinar - do sign up here.. http://www.stockopedia.com/webinar

| Link | Share | 1 reply
Analysis 7th Jun '14 3 of 13

In reply to post #83678

Best of AIM 1 Qualifying in UK

| Link | Share | 1 reply
seasons 7th Jun '14 4 of 13
2

I am a very happy user of the Quality and StockRanks.

While there is no doubt that LON:SPRP is a great stock, it is way too illiquid for me. I do not invest more than 5% of the average daily pound sterling changing hands (and no more than 0.5% of the market cap but that's usually not a problem :D).

According to my calculations, I should invest max 1.5% of my portfolio in SPRP. And then of course comes the prohibitive high broker cost in comparison to the money invested (as I have two smaller accounts under my management)

As a result 2/3rd of the stocks I am following I cannot invest in... This is currently 99 out of the 146 stocks I am following. Still, I have to follow them as I can't filter them out in the screeners.

With the long awaited US stocks finally coming on board I will have even more information to cope with.

I would appreciate if you could implement the following simple field so it could be applied on the stock screeners:
http://help.stockopedia.com/forums/18977-stockopedia-pro-feedback/suggestions/5715320-filter-out-illiquid-stocks

Thank you very much.

| Link | Share
TheWatchmaker 7th Jun '14 5 of 13

Hi Seasons - I can see why you'd need that 'illiquid filter' if I was applying the rules you state you follow. I look forward to being in the position where I need to include this factor in my decisions but my portfolio is 10 to 20x lower value than those you manage.
But your comments have made me re-assess the costs of high bid-offer spread (BOS) on AIM shares such as SPRP (which I do hold).
The following calculations are based on close price of 269.5p for SPRP and spread of 11p on 05-June-14, purchase of £5000, trade cost of £5 in each direction and ignoring any dividend :


Share Price %Gain (My % Gain after transaction costs)

-10% (-14.0%) , -5% (-9.1%) , 0% (-4.2%) , +5% (+0.7%) , +10% (+5.6%) , +20% (+15.4%) , +30% (+25.2%)

This helps illustrate the additional risk of shares with high BOS. If share price goes nowhere - I lose 4.5%. I need nearly 5% gain to break even.

Therefore, it is only sensible to trade these shares where you have a high confidence of large % gains in share price over your investment period. For myself, this still makes sense providing I manage to pick the winners and the % contribution to my portfolio is significant.

For your situation, I can see that the risk may outweigh the possible gains given that it would comprise just 1.5% of portfolio.

 

| Link | Share
PhilH 7th Jun '14 6 of 13

Hi,

I used to use the screen parameter 3m average voulme > 40000 to screen out illiquid stocks but even that isn't really helpful. What is required is the ability to calculate the value of the volume as there are wide variations in shares prices particularly if you look at European stocks. So I'd prefer to use 'share price * normal market size (nms)' > some value'

On a Stockreport normal market size is the figure with a grey background to the right of the price info in the top left hand corner. Unfortunately nms isn't available for non-uk stocks.

For the time being I've removed filtering of this and consider it on a case by case basis.

With respect to Sprue Aegis (LON:SPRP) they were so cheap when I bought them that the risk reward (even given the spread and liquidity issues) seemed positive. I'm currently sat on a 244% gain and it is my largest single holding. With a fwd p/e of 9.4, a forecast EPS Growth rate of 34% and a forecast risk adjusted peg of 0.37 I'm not intending to sell however I'm watching the momentum closely given recent downward eps adjustments.

Best of luck with your screening and investments
Regards
Phil

Professional Services: Sunflower Counselling
| Link | Share
Edward Croft 7th Jun '14 7 of 13

In reply to post #83836

Yep - sorry the AIM filter wasn't working for a few hours - it's back now though.

http://www.stockopedia.com/screens/best-of-aim-22076/

| Link | Share
tony akram 28th Jan '16 8 of 13

Ed, the best /worst of AIM filter is this updated daily ?

| Link | Share | 1 reply
Edward Croft 28th Jan '16 9 of 13

In reply to post #119936

Hi Tony - yes - when these articles link to stock screens, the screens update daily.

[Do note that this is an old article !]

| Link | Share
lightningtiger 28th Jan '16 10 of 13

There are some good stocks in the aim market. you have to keep an eye in them. Some of my best ones are TTR ,DTG, have done well and today FFWD has shot up again with 17.7% on 1.5M shares traded on an average volume of 596K. A similar happenings has been CNR with a 46.5% gain today with 3M shares traded, when average volumes have been 295K.
Of course some are bad and the spread can be also a killer. The good thing is there is no stamp duty to pay.
I also like to sort with using the 50 day MA.

The best Aim stock has been FRM with a gain over 52 weeks of a staggering 624%.

The worst Aim stock MTV 98% down!

| Link | Share
JoeRussell 29th Jan '16 11 of 13

Staff line does not have stock rank of 94
Joe

| Link | Share
lightningtiger 29th Jan '16 12 of 13
1

In the last hour, having a look around the Aim stocks VIS at 11:30 has got Chris Ingram putting 180K inti the company and the share price has jumped over 45% in this last hour!
There are 63 shares in the Aim market that have risen more than 20 % this month. 19 are above 30%. and 16 are above 50%. I have not counted the number this month that have gone up by more than 10% but it is a lot..
Most of the 63 shares have not got a good stock rating overall but the momentum for some is good..
TAIH was up today again by another 20.6%.
7DIG has had a n excellent turn round still up another 16.8% It is worth a bit of time fishing.

Time now 1:00PM VIS is up 70.9%

| Link | Share
vik2001 29th Jan '16 13 of 13

must be something wrong with the filters on best of aim, when you run it shows companies with market cap less than 100m. well 2 are showing up with 82 and 90m

| Link | Share

What's your view on this article? Log In to Comment Now

You can track all @StockoChat comments via Twitter

 Are LON:SPRP's fundamentals sound as an investment? Find out More »





Stock Picking Tutorial Centre



Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis