AIM stocks have been allowed in ISA portfolios for the past year, offering the potential for both stellar tax-free gains and losses. Demand is high with 30 per cent of all AIM shares purchased since last August heading into an ISA.Compared to the FTSE All Share and FTSE Small Cap Index, the FTSE AIM Index rallied when the rules were relaxed on 5 August 2013 but has been on a downward trend since March 2014.
Performance of indices since Aug 2013
Source: FE Analytics
The index tends to be more volatile than the FTSE 100 and FTSE 250 and so favours a place in a diversified and long-term portfolio but AIM stocks such as ASOS would have returned £7.8m on a £15,000 investment 10 years ago, despite sharp falls this year.
Here, Spooner reveals the three stocks he is tipping to soar.
Breedon Aggregates
This company is geared to a recovery in infrastructure spending and could be a boon for investors prepared to take a longer-term view, Spooner says.
“Despite sluggish infrastructure spend, Breedon Aggregates has seen margins improve, helped by lower costs, stable pricing and acquisitions. The company is positioning itself to benefit from any pick up in the economy and demand for its products,” he said.
The stock has been making rapid gains over the past three years. It is up 113.16 per cent compared to a relatively flat run for the AIM, which has gained just 1.65 per cent.
Performance of stock and index over 3yrs
Source: FE Analytics
However, the past three months has seen the stock lose 18.18 per cent.
“A number of acquisitions have been made which should help expand the company’s geographical presence in the UK and management expects these to make a significant and improving contribution,” Spooner said.
“As a result of continued recovery in the UK construction sector, the share price has risen by around 40 per cent [over the past year], with much of this growth coming from housing. In the latest update in July the company expressed confidence that further progress would be made in the second half of the year.”
Anpario
Spooner says this animal feed company taps into a long-term trend of upward demand for meat and fish, particularly in high growth emerging markets.
“Anpario is a tiny UK company trying to build a name for itself as an international producer of value-added natural feed additives in an industry where there is limited choice for investors. We recommend Anpario as a ‘buy’ for higher risk investors looking for a long-term niche idea.”
“The company already has a respectable geographical spread which helps offset regional, financial and geopolitical concerns. The growing pressure on feeding the world's population and demand for meat protein is unlikely to recede and Anpario is positioned to benefit from this.”
Over the past three years the stock has also made rapid gains and is up 199.97 per cent. Its performance in 2014 has been poor, however, and it has plummeted almost 30 per cent.
Performance of stock and index over 3yrs
Source: FE Analytics
Spooner added: “Anpario highlighted a good start to the year and its April results reported improving profits as a result of both organic growth and the 2012 acquisition of Meriden.”
Amerisur Resources
This oil and gas specialist has been one of the most popular shares to hold in an ISA over the past 12 months, Spooner says.
“Amerisur Resources is a small oil and gas exploration firm which operates in a potentially unstable region, so it represents a very high risk investment. The company has made significant progress in terms of exploration in recent years, turning exploration projects into productive assets.”
“Production only began at its Platanillo field in southern Colombia in 2012 and has now reached to 7,000 barrels of oil equivalent per day.”
The stock has gained a huge 241.78 per cent over the past three years, albeit with significant volatility that has seen in periodically plunge 30 per cent.
Performance of stock and index over 3yrs
Source: FE Analytics
Spooner says the outlook for the company is positive due to plans for further exploration, backed up by a strong balance sheet.
“Amerisur Resources’ fields are all set for more seismic and drilling activity and the company remains positive on their prospects. With production increasing at a rapid rate, the company is expected to build on last year’s performance with net margins predicted in the region of 45 per cent.”
“The company also has no debts on its books. With a forward price to earnings ratio of 12 times the valuation, Amerisur Resources compares favourably against its peer group.”
Other popular AIM shares in ISAs are Monitise, Quindell, Gulf Keystone Petroleum, and Earthport.
