The inequality of AiM: the big, the small and the average
As of 30 September 2016, there were 1,000 companies listed on AIM with a combined market capitalisation of £83 billion. Without the need for a calculator, the average capitalisation of an AIM company is £83 million. The range of values is hardly surprising with a number of £1 million companies dwarfed by the largest ASOS, at just over £4 billion.
AIM is a market for high growth companies and it could be argued that, ASOS and its other 6 peers capitalised at over £1bn, these companies apply for a main market listing.
It is worth noting that 80% of AIM companies are capitalised at less than £100 million and the spread can be seen in the table below:
We have talked previously that mainstream investment funds often shy away from smaller companies, as those listed on AIM, because they cannot arrange big enough deals or because these companies suffer from a lack of research. As our manager, Pilling has been dealing in such shares for over 8 years they are more adept at dealing with these limitations and passing the benefits to clients.
What becomes clear from the analysis of our AIM portfolio is that whilst the market has 80% of its constituents valued at less than £100m; our portfolio only has 15% of its stocks in this range.
The table shows that our AIM portfolio invests in some of the largest companies on AIM. For example, there are 22 companies capitalised at between £500m and £1bn and we invest in 40% of them.
We invest in companies with substantial balance sheets and strong trading performance, we are not interested in those stocks with a binary outcome such as mining.
I believe the data in this table helps to demonstrate that when investing in smaller companies clients should partner with sector experts.
Our track record is convincing with strong outperformance at the FTSE AIM Index since 2008. AIM isn’t for everyone but equally its not the wild west as many suggest given the average market capitalisation is over £340 million in our portfolios.
We offer AIM portfolios both inside and outside an ISA wrapper.