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The AIM conundrum examined as the market finally makes it back to pre-credit crunch levels


For a few years, UK investors have cast envious (and occasionally bemused) eyes across the Atlantic as US indices hit new highs.

Even after the pandemic knocked markets for a six, US indices recovered to break new ground by the end of the year, putting the FTSE 100’s recovery in the shade.

Much of the impetus in the US has been driven by the Nasdaq index, which is heavy on technology stocks.

The UK does not have a market that specialises in technology stocks but it does have AIM, a market set up specifically for growth stocks. AIM might not have been the runaway success that Nasdaq has been of late but it has undoubtedly generated some spectacular winners even if the performance of the market as a whole has been pedestrian.

It’s worth noting that the FTSE AIM 100, the index of AIM’s top 100 stocks, has only recently regained the level it enjoyed before the financial crash in 2007. Over the same period, the FTSE 250 has risen by 84% (the FTSE 100 is barely above its July 2007 level), which is a bit puzzling when you consider the astonishing gains some of AIM’s glamour stocks have racked up.

Put a gun to my head – admittedly a strange thing to do just to get me to make a guess – and I would have plumped for ASOS PLC (LON:ASC) as the best performer since July 2007 (the month that marked the year’s high point for the FTSE AIM 100) and I would not have been far off; with a 4,020% rise it was the second-best performer.

Capitalised at GBP4.9bn, ASOS has reclaimed the crown of the most highly-valued company on AIM from Boohoo, which did not even exist in 2007.

It has to make way for Judges Scientific PLC (LON:JDG) as the best performer, however. Somehow, even after rising 5,920%, the scientific instrument specialist still has a market capitalisation of just over GBP400mln. I haven’t done the maths but I imagine that if you and I had done a quick whip-round back in 2007 we could’ve bought the entire company out with what cash we had in our pockets.

These days, of course, we don’t have any cash in our pockets.

There are two sides to a stock market, with the flip-side to its role as a secondary market where people can buy and sell shares being its role as a primary market, where companies can issue shares to raise fresh capital.

On this score, AIM has, if anything, been even more successful.

From the beginning of 2007 to the end of 2020, GBP81.75bn has been raised from 1,241 new issues.

Although the number of companies listed on AIM has roughly halved to 819 (from 1,634 at the start of 2007), the capitalisation of AIM as a whole has risen to GBP131.13bn from GBP90.67bn, despite the likes of Melrose Industries PLC (LON:MRO), Domino’s Pizza Group PLC (LON:DOM), Booker (now part of Tesco) and Big Yellow Group PLC (LON:BYG) defecting to the main market.

The market used to have a reputation as being a bit like the wild west but those days appear to be gone. The relatively lacklustre performance of the AIM 100 index is a bit of a head-scratcher. I’d wager the AIM 100’s best performers comfortably outpace the FTSE 250’s in most years so I guess the moral of the story is that it remains a stock picker’s market.

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