- FTSE AIM 100 index plummeted to nearly 3,000 points during the peak of unprecedented crisis
- AIM index encompasses businesses spanning from newly established, venture capital-funded start-ups to more mature and well-established organisations
- AIM stocks are quite affordable in comparison to the blue-chip stocks
The world is traversing through the darkest hours in recent times due to the economic impact of the novel coronavirus. FTSE AIM 100 index plummeted to nearly 3,000 points during the peak of unprecedented crisis and has recovered by nearly 50 per cent since then.
The UK’s FTSE AIM 100 Index is the stock market index of the top 100 companies based on the market capitalisation on the Alternative Investment Market. It encompasses an array of businesses spanning from newly established, venture capital-funded start-ups to more mature and well-established organisations, looking to grow further.
Coronavirus spillover has jolted market sentiment globally. Stock markets across the world went into a steep bearish trend and are now recovering gradually. Major world equity indices like Dow Jones, S&P 500, Nasdaq Composite, FTSE 100, DAX, CAC, Hang Seng, Kospi, Topix, and others slumped, wiping out trillions of dollars of investors wealth during the unprecedented crisis.
Unlike FTSE 100 listed business, the FTSE AIM companies are major contributors to the domestic economy. These companies have wider coverage across multiple sectors and are not just restricted to niche segments.
There are plenty of reasons to look forward to FTSE AIM stocks. Although the British Prime Minister believes that the United Kingdom has passed its peak, but the possibility of the second wave of the deadly pandemic cannot be overlooked. Recently, the lockdown was imposed in Leicester, a city in England, due to a sudden spike in the number of coronavirus patients. In addition, the US-China row sent jitters to the global indices.
The slower reopening of the economies and dented consumer confidence has added to the existing challenges faced by the businesses and the economies around the world. However, throughout these turbulences, the domestic economy has played a significant role so far. In addition, the British government has launched several support schemes to support these businesses.
According to experts, investors should consider investing in the UK’s domestic economy by taking exposure in the FTSE AIM stocks. These are quite affordable in comparison to the blue-chip stocks. Right stock selection could even outperform the mainstream stocks. Most of the asset managers and investors tend to include AIM-listed securities in their portfolio.
The AIM-listed businesses are mostly resource companies, pharmaceutical or technology companies. Experts believe that innovation-led products in these sectors and policy restructuring could help UK’s economy to climb out of recession. For instance, a breakthrough in drug development can help in containing the spread of the pandemic. Experts fear that the economy is heading towards a U-shaped recession. Meanwhile, the piling debt of UK businesses is mounting further pressure on the economy.
UK stock market is currently facing a plethora of uncertainties and investing in AIM stocks amid these challenges is not for the faint-hearted. However, a significant amount of exposure to AIM stocks could help in boosting the overall performance in the long run.
However, investors should take a prudent approach while investing in AIM-listed securities. The investors could look at trading volumes for ensuring sufficient liquidity in the stock. In addition, the investors should analyse the historical shareholding pattern by institutional investors or promoters to mitigate risks of price manipulations.
In this article, we are going to discuss insight about a few stocks which operate in the different realms of the economy and are quoted on the AIM platform of London Stock Exchange (LSE).
- Bilby Plc (LON: BILB)
UK based industrial stock Bilby Plc is engaged in providing building maintenance, heating, and electrical services. The company has won new contracts worth £49.1 million in FY19 and has visibility of revenue of close to £172.1 million over the next three years. The Company secured new financing facilities of £9.8 million from HSBC, which includes a term loan facility of £7.3 million and an overdraft facility of £2.5 million. As lockdown eased, the employees of the group faced challenges in entering some of the properties to provide service as residents were reluctant in providing access. The Company engaged actively to chalk out new plans for recommencing of work and discussed with the customers regularly. The group is confident about the current liquidity position to deal with economic uncertainty. The Company's primary focus would be providing top-notch customer service. The services provided by the Company are considered an essential service. Bilby Plc's shares were trading at GBX 23.50 and were up by 11.91 per cent against the previous closing price (as on 28 July 2020, before the market close at 1:40 PM GMT+1).
- Zinc Media Group Plc (LON: ZIN)
UK based media group, Zinc Media Group Plc is engaged in producing content for multimedia platforms. According to its recent trading update, the Group, won contracts of new production worth £2.7 million in the recent months (since May 2020). The Group has resumed paused production faster than expected. The Group expects to be profitable in 2021 and cash generative by the second half of 2021. ZIN shares were trading at GBX 61.00 and were down by 12.23 per cent against the previous closing price (as on 28 July 2020, before the market close at 1:50 PM GMT+1).
- Genedrive Plc (LON: GDR)
Genedrive Plc is a UK based pharmaceutical group. The Company has developed Genedrive 96 SARS-CoV-2 kit. The equipment is designed to detect the active infection in the Covid-19 patient; the kit is a Polymerase chain reaction (PCR) assay. The kit received CE-IVD mark on 22 May 2020, and it has signed a contract with eleven countries for the supply of kit. The Company is focused on expanding the commercial footprint in India, Africa and the US and has applied for the regulatory approvals. The Company has received orders of £1.0 million, but it is awaiting regulatory approvals. The Company is optimistic over Genedrive 96-SARS-CoV-2 test kit, and it is in the process to attain regulatory approval in new markets to expand the portfolio. GDR shares were trading at GBX 81.00 and were down by 1.82 per cent against the previous closing price (as on 28 July 2020, before the market close at 1:57 PM GMT+1).
The stocks discussed, have been through decent price corrections in the recent months. These companies have resilient business models. As the lockdown has eased, most of these businesses are chalking out plans to recommence economic activities while adhering to the safety guidelines. Investing in AIM stocks can really pack a punch if they go right as they add another dimension to the portfolio. Before taking exposure in AIM stocks, it is imperative for investors to consult an expert or carry out comprehensive research.