A micro-cap oil company, a digital payments business and a beleaguered large-cap miner are some of the stocks that The Share Centre is highlighting for investors who can tolerate holdings others might be scared of. 
Following Halloween, The Share Centre investment research analyst Helal Miah has picked out four businesses where there are reasons to be cautious but signs of a promising investment opportunity for those with the risk appetite and a balanced portfolio.
Here we take a look at Miah’s stock picks for the brave investor.
Amerisur Resources
This is an AIM-listed full-cycle oil and gas company that focuses on South America, with assets in Columbia and Paraguay. It is currently drilling its Loto-2 well with results from tests expected to arrive soon; any good news could help push the share price higher.
As the graph below shows Amerisur Resources’ share price has been falling over the past year or so as the oil price slid, but Miah thinks this might be an attractive entry point for more aggressive investors.
Performance of stocks vs index over 3yrs
Source: FE Analytics
Miah said: “This spookily small oil and gas exploration firm operates in Colombia, so any technical or natural disasters could significantly haunt the share price. The region is politically unstable and the company has felt the wrath of the recent plunge in oil prices.”
“However, investors should appreciate that the company has made significant progress in terms of its exploration in recent years, turning projects into productive assets. We recommend Amerisur Resources as a ‘buy’ chiefly for its exploration prospects and rapid increase in productive capacity. However, this is a stock not for the faint hearted due to the higher level of risk associated with it.”
Iomart
Iomart is an information technology and cloud computing company, which was founded in 1998 and listed on the AIM in 2000. It provides cloud storage for clients and manages data centres in eight UK locations and six international sites.
The company’s shares have been more volatile than the market and fell strongly from their peak in September 2013, before staging a recovery at the end of 2014. It did have a sharp fall in September 2014, dropping about 16 per cent when private equity firm Cinven seemed to give up interest in the firm.
Performance of stocks vs index over 3yrs
Source: FE Analytics
Miah said: “Iomart is one of the UK's leading providers of cloud computing services in an industry that is expected to grow terrifyingly rapidly, as companies and consumers generate more data and become comfortable with having that data located offsite.”
“The company’s shares have staged a good recovery since disappointing results last year, cementing our belief that the long-term prospects have not fundamentally changed. We therefore recommend Iomart as a ‘buy’ for fearless investors looking for capital growth and willing to accept a higher level of risk. This business is operationally geared, meaning it can take more business for relatively little cost.”
Optimal Payments
Optimal Payments – formerly known as Neovia Financial – is an online payment software specialist, with products used in 200 countries by businesses and consumers. It owns a number of products, including the Netbanx gateway, Neteller e-money payments, a free person-to-person money transfer service, and the Net+ prepaid card.
After buying Skrill Group, a digital payments company operating across Europe, the company now hopes to move away from AIM and apply for a main market London Stock Exchange listing. The Skrill acquisition roughly doubled the size of the company and handed it a large slice of the European online payments market.
“The company, which is currently listed on the forbidding AIM market, has seen a continuation in the strong trading it experienced last year, with both the Neteller and Netbanx products performing well. Furthermore, the group believes that the integration of the recently acquired Skrill business is going well, alongside the two other recent acquisitions, GMA and Meritus,” Miah said.
“Potential growth for this company is huge due to the significant opportunity for the group's products in the US and around the world. As a result, we believe Optimal Payments is a company to get your claws into but don’t be fooled, this is a company for investors with a balanced portfolio.”
Performance of stocks vs index over 3yrs
Source: FE Analytics
Randgold Resources
Most investors will know that gold has a difficult run since its price peaked in 2011, causing knock-on problems for the miners whose business is based around getting the yellow metal out of the ground and selling it on.
One company that has been seen its share price hit by not only this but instability in the country where it conducts much of its operations is FTSE 100-listed miner Randgold Resources. FE Analytics shows the stock is down some 35 per cent over three years, while the blue-chip index has gained 23.54 per cent.
Performance of stocks vs index over 3yrs
Source: FE Analytics
Miah said: “This is a gold miner whose principal operations are in Mali, a country with significant levels of political instability. The past tensions have impacted confidence in the company's share price, but operations on the ground remain largely unaffected. Along with the political risks, Randgold Resources has been spooked by the decline in the price of gold.”
“However, investors should acknowledge that the company has been fairly consistent in increasing production, producing record amounts of gold each quarter. This is a well-run, low cost producer that finances exploration and expansion from cash flows rather than debt. We therefore recommend Randgold Resources as a ‘buy’ for investors willing to take on a high level of risk for a play on gold. Be warned, this is an investment idea for those who don’t scare easily.”
