AIM for Growth

I recently shifted my investment strategy to focus on UK growth stocks in the search for higher returns than that on offer in the FTSE 100. As a result, this has lead my research into the FTSE AIM index, which is a market for smaller growth companies to raise capital to fund expansion. The AIM index provides a great alternative to the FTSE 100 for portfolio selection and offers a host of benefits for new investors. SOURCE OF GROWTH The FTSE AIM 100 is full of great stocks, including names such as Fevertree, Boohoo Group PLC, and my previously discussed AB Dynamics . Such stocks have produced stunning returns over the years such as a 1500% return since 2015 for AB Dynamics and over 1300% return for Fevertree within the same time period. It is important to understand though that due to such great returns there is the potential for equally large downside. For example, the recent collapse of Burford Capital which dropped over 60% in one week. This is why I would suggest that AIM...

Due to lower coverage versus larger market cap stocks like FTSE 100 giants Hargreaves Lansdown and Experian, investing in AIM stocks can be hard. Especially when you are trying to come up with new companies that you know little about or have never heard of before. Here I discuss my tips for how to start the process of creating a pool of stock ideas to look further into, conducting your own analysis to further examine them. For example, looking at valuation metrics such as operating margin and return on capital employed, and identifying areas that will make the business profitable for years to come such as trends and clients. PAST PERFORMANCE When investing I like to look for companies that have a track record of robust performance. Though past performance is not an indicator of future returns, I believe that it does highlight that sentiment towards the business is improving which generally occurs from improving valuation metrics and the business being able to continuously beat m...

Big data is becoming increasingly prevalent in everyday lives. It’s influencing all aspects of life, with an increasing reliance on technology such as smartphones and the growing usage of the internet of things (IoT) such as Amazon’s smart speaker Alexa. This has caused large inflows of big data that companies can use to their advantage, presenting a variety of investment opportunities. BIG DATA INDUSTRY  According to the International Data Corporation (IDC), worldwide revenues generated from big data are forecasted to increase by 12% from 2018, reaching $189.1 billion in 2019. Furthermore, looking specifically at the software and services sector, big data market revenues are projected to rise from $42 billion in 2018 to $103 billion by 2027. Positive forecasted growth is reflected by the amount of high performing companies that populate this sector in the FTSE AIM All-Share. Geographically, the United Kingdom will become the third-largest generator of big data ana...

In March I invested in the challenger law firm Keystone Law. Though performance has only seen a slight upturn with a 6% increase since my investment, I still believe that the AIM stock has a bright future going forward. The company historically has done very well, with a rise of 174% since it first listed on the AIM market back in late 2017 and now has a market cap of £163 million.  DISRUPTIVE MODEL Keystone Law as referenced are situated in the legal services sector but offers a different approach to other law firms, using ‘technology and modern working practices’ to disrupt the industry. The firm's business model relies on self-employed lawyers who work from their own offices but are supported by Keystone Law's head office, allowing them to focus on value-adding and revenue-generating legal services. In return, Keystone Law charge 25% on fees generated. The company is underpinned by solid valuation metrics, with an operating margin of 11% and a return o...

When investing in the UK market I normally focus my research on FSTE AIM stocks as I think this is where greater growth can be found as the FTSE 100 is very well covered in comparison to small and mid-cap stocks. This means that the market has priced in future growth for the relevant companies.  However, the FTSE 100 does offer a variety of companies that can provide a good source of steady growth to mitigate risk in your portfolio against smaller, higher-risk growth stocks. A FTSE 100 giant that I think will do well over the long term is Experian, providing a steady stream of growth to support an investor’s portfolio.  WHAT THEY DO? Experian is a global information servicing company, supplying global services to over a billion people. They are most famous for their credit checks business, currently one of the top three credit checking agencies globally, but they also offer a variety of information processing services.   From an investment perspective, th...

At the beginning of the year I bought AIM super stock, AB Dynamics and after 5 months it has earned a return of over 50%. This is extremely impressive compared to a return of around 12% for the FTSE AIM 100 and a rise of only 7% for the FTSE 100 for the same period.  The company’s high growth performance isn’t just in isolation either, with the stock producing over a 357% return since the start of 2017, suggesting that this isn’t just a lucky year or an overhyped valuation by the market. So the question is, can the stock continue to grow?  WHAT THEY DO AB Dynamics supply integrated test systems for the automotive industry, with a client list that includes major brands such as BMW, Audi, and Chrysler. The stock is currently listed on the FTSE AIM market, with a market cap of £471 million.  The testing industry may be an unglamorous part of the automotive industry versus investing in brands such as BMW and Rolls Royce, but it is an important part of the...

Burford Capital Ltd (BUR) is one stock that I’m still unsure about as it’s very difficult to understand how the business is doing, and therefore understanding its long term profitability proves a problematic task. To give context, Burford Capital is listed on the FTSE AIM 100 and is an investment firm that specialises in generating finances for litigation, along with associated activities such as advisory services in the legal field. WOODFORD Though the stock isn’t in the LF Woodford Equity Income fund, it is held in another Woodford Investment fund, Woodford Patient Capital Trust. This is a closed-ended fund, aimed at delivering long term growth. However, due to being under the same management in Woodford, the firm could suffer indirectly from a decrease in sentiment towards Woodford’s investment approach. VOLATILE The business has done extremely well in the long term, recording a return of 691% since 2016. However, the stock has been particularly volatile in the sh...