Top 100 AIM shares

AIM was launched by the London Stock Exchange (LSE) in 1995, starting life with just 10 companies worth £82 million. Since then, over 3,600 businesses have graced AIM and raised almost £113 billion from investors. The companies listed on AIM – from both the UK and abroad – make a significant impact on the UK economy, contributing over £15 billion in annual gross domestic product (GDP), more than some of the country’s biggest industries such as aerospace, automotive, defence or pharmaceuticals.

1. What you need to know about AIM shares
2. Top 100 AIM shares
3. Top 5 AIM stocks to watch

Why do companies join AIM?

'AIM is the most successful growth market in the world' – LSE.

AIM is designed for small and medium sized businesses that wish to list their company on a stock exchange but are not yet ready for a full traditional listing. The main reason businesses choose to go public on AIM is because they need capital to grow, and sourcing other finance can be difficult.

The number of AIM initial public offerings (IPOs) has been in decline over the last two years, but four companies have joined the market since the start of 2019 with over £1 billion raised in total. In 2018, 52 new companies joined AIM and raised £1.6 billion, with another 13 existing companies raising a further £3.9 billion. The peak year for IPOs was in 2005 when nearly 400 new companies joined the market, but it has remained below 100 per year ever since the financial crisis.

What are the top upcoming IPOs in 2019?

The market has proven its ability to provide the vital funding needed to nurture small businesses. The majority of funds raised on AIM is by companies that have already listed, demonstrating that firms are able to tap into vital liquidity even after they have conducted their IPO. In the first three months of 2019, the value of monthly trades on AIM averaged around £5 billion, coming in at around 40,000 trades worth a combined £230 million per day.

It also brings companies under a recognised regulatory and compliance framework that sets the standards for listed companies, which gives them higher recognition among investors and important institutions like banks and foreign lenders. However, while the regulatory regime is strict it is designed to make it easy for new businesses to float on AIM; it does not require a business to be of a particular size (as is the case elsewhere), but instead requires a company to have a three year operating history and the ability to demonstrate its worthiness.

Today, there are close to 900 stocks listed on AIM worth almost £100 billion. The vast majority of businesses that list on AIM end up leaving for one reason or the other - some grow and take a step-up to a bigger listing (such as on the Main Market) while some fail and collapse. Others get bought out by peers or are taken back under private control.

How many companies are listed on AIM and where do they come from?

Are AIM stocks a good investment?

In a nutshell, AIM stocks offer both higher risk and higher reward for investors. Share prices can move by double digit percentages in a single day and it is not uncommon for a stock to pop higher or lower on a one announcement.

The attractiveness of the AIM market is the ability to invest in companies early on to help build the value of both the company and your investment over the longer term. Many highly successful companies and widely recognised names began their lives as public companies by listing on AIM before moving on to a traditional listing: Domino's Pizza Group, insurance provider Hiscox, self-storage firm Big Yellow Group and bookmaker GVC Holdings, to name a few. For example, investors could pick up GVC shares for less than 90p each back in 2007, when it was just launching its first sportsbook, but that had soared to £5 days after it joined the Main Market in early 2016. Today, GVC – the owner of Ladbrokes Coral - is a member of the FTSE 250 generating almost £3 billion in annual revenue.

It is important to stress that not all companies are successful and that many fail – often in spectacular fashion. Plus, volatility is much higher than larger stocks because AIM companies can be very sensitive to the slightest development. Winning or losing one contract can make or break many firms, and it is common to see companies completely revamp their strategies. Langbar International, a cash shell that joined AIM in 2003, saw shares jump from 10p to £10 just on the announcement of a new chief executive being appointed but, just two years later, that same chief executive officer (CEO) was jailed for losing £370 million that had been stashed somewhere in Brazil. Investors that had backed what was the initial success story of Nigerian oil producer Afren are still fighting claims in court today after the firm collapsed under questionable circumstances back in 2015.

The accessibility and success of AIM means investors have an eclectic choice of stocks and sectors to pick from. There are stocks for investors looking to gain exposure in more traditional sectors such as banking, retail, construction and pharmaceuticals – areas often dominated by big and expensive stocks – as well as investors looking for something with an edge, with companies working in diverse fields like public polling, video games and automation.

Top 100 largest AIM stocks

Below is a list of the 100 largest stocks listed on AIM as of 4 April 2019. It has been based on the constituents of the FTSE AIM 100 Index, which includes the 100 largest companies by market cap.

The table outlines the share price movement for each stock over the last 12 months, as well as the 12-month high and low to help demonstrate the volatility of each stock.

Top 5 AIM stocks to watch

1. Burford Capital
2. Fevertree Drinks
3. Hutchinson China MediTech
4. ASOS
5. Abcam

Burford Capital: world's largest provider of arbitration and litigation finance

Burford Capital was founded in 2009 when its chief executive Christopher Bogart wielded funds raised from working as general counsel to Time Warner on its merger with AOL. The company was a pioneer in providing institutional-quality commercial litigation finance and aims to 'address the impact of unequal financial resources on litigation outcomes'.

The company’s income is derived from providing litigation finance as well as risk management and asset recovery services to its clients and law firms around the world. Burford’s most recent results showed it delivered its ninth consecutive year of profitable growth, with income rising 23% year-on-year (YoY) to $420.4 million to push pretax profit 19% higher to $315.5 million. That allowed the firm to up its dividend for the year by 14% to 12.5 cents per share.

Burford is bullish on its future. The company had a particularly strong year in 2017 when demand for its capital was three times higher than the year before but warned it could have been a ‘one-off anomaly’. However, it has said the 'consistently high demand' for capital, with new investments broadly level year-on-year at $1.3 billion in 2018, means this was not the case. 'Burford has committed $2.6 billion to new investments in just the last two years, more than twice its lifetime cumulative commitment level prior to that time. That is extraordinary and suggests a sea change has occurred in the legal finance marketplace,' said Bogart following the 2018 preliminary results.

Fevertree Drinks: the upmarket mixer maker

Fevertree Drinks, which produces premium mixers for alcoholic beverages, has been a soaring success since listing in 2014, having more than trebled in value since the middle of 2016. The company has triumphed off the back of the booming market for premium spirits, starting with gin and gradually moving to dark rum and others.

Fevertree is the most popular mixer brand in the UK off-trade (supermarkets and stores) and it is still growing its position in on-trade (pubs and restaurants). It is also expanding in both the US and Europe. Revenue in 2018 rose nearly 40% in 2018 to £237.4 million to push pretax profit 34% higher to £75.6 million. As a result, it raised its dividend by a similar rate to 14.5p from 10.65p.

The primary reason that Fevertree has been able to grow significantly over the years is because it largely outsources key operations like manufacturing, which means it does rely on partners to make it more exposed to third-party risk.

Hutchinson China MediTech: the biopharma and pharma stock

Hutchinson China MediTech is a biopharmaceutical company pursuing treatments for oncology and immunological diseases. It currently generates revenue by manufacturing and distributing prescription drugs and other health products to consumers in China. It is majority-owned by CK Hutchison Holdings Limited, a conglomerate with annual sales of over $500 billion.

Last year was mixed for China MediTech. Revenue declined for the first time in years to $214.1 million from $241.2 million in 2017, with its pretax loss ballooning to $86.7 million from $53.5 million. Although it is hoping to secure regulatory approval for three of its new drugs over the next three years, research & development (R&D) is burning through cash at the moment.

ASOS: fast fashion for millennials

ASOS has been one of the biggest beneficiaries of the transition to online shopping that has left bricks-and-mortar retailers struggling. The online fashion retailer has continued to deliver growth in its core UK market as well as expansionary geographies in the US and Europe, but it has seen a slowdown. Total retail sales grew 26% in the 12 months to the end of August 2018 but that has slowed to 13% in the subsequent six-month period.

The company is having to raise investment in areas like marketing and pricing. As a result, It has said sales in the current financial year to the end of August 2019 are still expected to grow by 15% but says its retail gross margin will tighten while its wafer-thin earnings before interest and tax (EBIT) margin will remain unchanged at 2%.

Abcam: a profitable biopharma business

Abcam produces antibodies mostly used for research purposes and protein-analysis tools. Abcam’s interim results for the six months to the end of 2018 showed an acceleration in revenue growth of 11% to £124.7 million but a slowdown in pre-tax profit growth of only 2.7% to £33.7 million. The interim dividend was raised 3.55p from 3.42p the year before.

Abcam has said it aims to keep on its ‘low double-digit growth trajectory with attractive margins’ and said its annual adjusted earnings before interest, depreciation and amortisation (EBITDA) margin will be around 35% in 2019 compared to 35.6% in the first half, down from 38.0% the year before.