"It's great to see that AIM shares will be permitted in ISAs as soon as 5 August," he said.
"While investors' decisions must be on their individual circumstances and risk appetites, the move allows them to take advantage of a much wider range of stocks offering both growth prospects and value."
"A substantial proportion of invested funds is now tax sheltered in ISAs so it is great that AIM shares will no longer be tax-disadvantaged compared with other stocks. Investors only had limited access to AIM-listed stocks, either through a self-invested pension plan (SIPP), or through the small pool of AIM stocks that are dual-listed on foreign stock exchanges."
"The move to allow direct investment through an ISA is also a precursor to the removal of stamp duty on AIM-listed stocks next April," he added.
Here, Helal Miah, investment research analyst at The Share Centre, highlights five AIM-listed stocks that he currently rates, which could act as a welcome addition to an ISA portfolio this year.
Incadea
"Incadea is a software company whose products aim to improve the performance and efficiency for car dealerships, and since coming to the market in May 2012, the share price has made steady headway," said Miah (pictured below).
Performance of stock and index since May 2012
Source: FE Analytics
"The company has a presence in around 80 countries and 2,000 dealerships, with established relationships with BMW, Nissan, Mercedes and VW."
"It is currently concentrating on developing into emerging markets, especially the BRIC markets (Brazil, Russia, India and China), where opportunities are far greater than in parts of Europe."
"The April results showed Incadea is making excellent progress, with increased demand from clients, and this is expected to be reflected in an improving revenue stream. As expected, a first dividend for shareholders was announced."
"This is a higher-risk smaller company idea for the medium- to long-term, which is establishing itself across the globe in a niche market."
The company is currently trading on a price/earnings (P/E) ratio of 12.6 times, according to company reports. It has a market cap of £55m.
There is not a single IMA fund that currently holds Incadea in its top-10.
Amerisur Resources
Miah also rates small oil and gas exploration firm Amerisur Resources, but says it invests in a risky area in terms of both sector and geography. Its two biggest operations are in Colombia and Paraguay.
"In terms of exploration, the company has made significant progress in recent years, turning exploration projects into productive assets," said Miah.
"The current total production level is 8,500 barrels of oil per day. The target is to double the 2012 production rate by the end of 2013."
"With production increasing at a rapid rate, the company is expecting to build on last year's performance with net margins expected in the region of 45 per cent higher, helped by the fact that the company has no debt on its books."
Amerisur Resources has held up much better than the vast majority of mining stocks over the last year, posting a positive return of 21.43 per cent over the period. The company’s longer-term record is also very strong; our data shows it has returned 679.17 per cent over the last five years.
Performance of stock and index
| Name | 1yr returns (%) |
3yr returns (%) | 5yr returns (%) |
|---|---|---|---|
| Amerisur Res | 21.43 | 259.62 | 679.17 |
| FTSE 350 Index Mining | -9.83 | -15.06 | -25.22 |
Source: FE Analytics
The company has a market cap of £472m and is trading on a forward P/E ratio of around six times.
Again, no IMA funds hold the fund in their top-10, although FE Alpha Manager Giles Hargreave is a big fan, tipping the stock in an interview with FE Trustnet at the back end of last year.
Mulberry
The luxury goods sector has come under some pressure recently, partly as a result of concerns over growth in China and the rest of the world.
Mulberry has itself been weak, although Miah points out that this has been more to do with its heavy focus on the UK and European markets, where the economic conditions have been much weaker.
However, for investors with a long-term horizon, he remains optimistic.
"We believe that for the high-risk investor, this represents an entry point for a long-term investment into a stock that has the potential to see significant demand growth," he said.
"Also, the potential will be increased if it manages to shift its sales focus to emerging countries such as China, where the evolving demographics favour luxury goods. Other luxury brands are doing extremely well from Asian demand and we believe that Mulberry can prosper too," he added.
Mulberry is down more than 50 per cent since its peak back in April 2011, but it still has a stellar record over the long-term.
Performance of stock over 10yrs
Source: FE Analytics
The £586m firm doesn’t appear in the top-10 of any UK funds.
Monitise
Miah likes the regional diversity offered by a company such as Monitise, and believes its recent M&A activity bodes particularly well for the future.
"There has been renewed interest in Monitise from investors due to news that it had completed a new deal with Telefonica, following recent deals with Lloyds and Visa Card Europe," said Miah.
"The US market is huge for Monitise and over 200 institutions have signed agreements. However, the jewel in the crown is the deal that was arranged with Visa Inc: this gives Monitise access to Visa's 1.7 billion cardholders."
"Monitise reported interim results that show the company continues to confidently head in the right direction. Also, the company's global ambitions have been helped by the acquisition of their peer, Clairmail, in the US for $173m in shares, and once amalgamated the group should be set to break even by late 2014."
"We continue to recommend investors buy Monitise for a high risk, early-stage investment opportunity."
Cavendish AIM and Cavendish Opportunities are two of four IMA funds that hold Monitise in their top-10.
Performance of stock since June 2007
Source: FE Analytics
The company’s share price has recovered strongly since the depths of the financial crisis. It is up almost 1,000 per cent since March 2009, and 74.12 per cent since it listed in June 2007.
Hutchison China Meditech
This $242m company is a favourite with FE Alpha Manager Mark Slater, who holds it as a major position in his MFM Slater Growth and MFM Slater Recovery funds.
Miah likes the stock, but says it is only suited to investors with a stomach for volatility, and who want exposure to China.
"The business is focused primarily on China. The benefit of this is that as the Chinese population becomes more affluent, there is a significant upturn in those signing up for medical insurance and also by the government on national healthcare," he said.
"To give an indication of the potential market, the average amount spent on healthcare in the US is just above $7,000 per person per year, while the average in China is about $150."
"There has been positive news-flow about joint ventures and drug trials. One of Chi-Med's products has made it on to the Chinese essential list of medicines, of which there are only around 370."
"However, this is a high-risk 'buy' idea for investors seeking exposure to China."
The stock has had a tough three months, losing more than 10 per cent over the period. However, over five years it is still up more than 280 per cent.
