Most popular Aim stocks for Isas revealed
It's been 12 months since investors were finally allowed to put Aim-listed companies in their stocks and shares Isas. And what a rollercoaster year it's been.
There have been plenty of winners and some notable losers, but the real story here is the gusto with which private investors have taken advantage of the new Isa rules. Research from our sister website Interactive Investor reveals some interesting facts.
Firstly, performance: between 5 August 2013, when the Isa rules changed, and the same date this year, the FTSE Aim All-Share index grew just over 3% to 755.
The data shows investors were quick to take advantage of the new rules. In 2013, only three Aim companies made Interactive Investor's list of 20 most-bought companies for Isas.
Only Gulf Keystone Petroleum, Xcite Energy and Quindell made the list, taking third, fourth and 11th place respectively. In 2014, so far, there are new kids on the block making a name for themselves. In fact, half of the top company equity trades (excluding iShares) were Aim-listed.
The ever-popular Gulf Keystone has jumped two places to first position, Quindell is second, newcomer Rare Earth Minerals occupies fifth place and Xcite still in there at seven.
Also joining these were Leni Gas & Oil, Blinkx, Monitise, Range Resources and Mosman Oil and Gas.
"When Aim shares became Isa eligible for the first time a year ago, it caused an immediate spike in trading volumes," says Rebecca O'Keeffe, head of investment at Interactive Investor.
"Whilst a lot of the initial flurry of activity was caused by people selling their existing Aim holdings and buying them back in an Isa account, we have seen a sustained increase in Aim trading with trading volumes up 43% year-on-year."
Rare Earth was among the most active Aim Isa stocks in the past year, a period in which its share price rocketed over 38 times, turning a £1,000 investment into £38,109.
"However, Xcite Energy, which was number two on the list has seen over a third wiped off its share value, returning -35.41% across the year," says O'Keeffe.
"These returns may seem extreme and in the case of Rare Earth Minerals, they are - but investors in the Aim sector are deliberately looking for the next potential winners and are fully aware of the downside."
Other incredible winners over the past 12 months include cannabis-based medicines company GW Pharmaceuticals - up almost 700% at 450p - online trading platform Plus500 (PLUS), which has surged by 245%, and Quadrise Fuels International, a developer of low-cost synthetic fuel oil that has gushed 235% higher.
Mike McCudden, head of advanced products at Interactive Investor, heralds the tax advantages of putting Aim stocks in your Isa as positive, but warns: "You've got to be lucky with Aim because it underperforms generally other markets, like the FTSE, and generally clients will still prefer to keep their longer-term holdings in blue-chip stocks.
"And these stocks are highly volatile, it is a lot like playing roulette with your investments. So it is a much higher-risk market for obvious reasons. Some stocks can perform amazingly well an increase of 1,000%, but others can fall 75-80% in a year. But you don't see that volatility with blue chip, unless something spectacularly nasty happens."
To retail investors, McCudden advises: "You just have to weigh up the risks, it is always advisable to have a small part of your portfolio in high-risks stocks, but the body of your portfolio and generally the vast majority of people's portfolios are sat with safer, bigger-yielding stocks. So you have to balance out nice tax advantages with overall performance of the market and the risks inherent with trading on the junior market."
This feature was written for our sister website Money Observer
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.
Named after a high value gambling chip, the term is used for an investment seen as solid and whose share price is not volatile. Blue chip companies are normally household names and have consistent records of growth, dividend payments, stable management and substantial assets and are the bedrock of a pension fund’s portfolio.