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MARKET COMMENT
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The Alternative Investment Market (AIM) is one of the City's success stories. Formed nine years ago, the junior bourse of the London Stock Exchange (LSE: LSE) has since witnessed 1,348 admissions and raised £12b from investors. AIM possesses many differences from the LSE's main market, notably a less stringent regulatory regime and certain investor tax benefits. Such measures make AIM a prime destination for young and growing companies, as evidenced by the ongoing domination of the market by companies with valuations below £50m. AIM does suffer one major drawback though: the shares listed upon it cannot be held within a tax-free ISA wrapper. AIM has produced its fair share of successful growth stocks over time. The likes of Domino's Pizza (LSE: DOM), Majestic Wine (LSE: MJW) and Mears (LSE: MER) for instance are some of the more popular amongst private investors, though their current valuations more than reflect the admiration. If you can stomach the greater risks that come with AIM shares, there are a handful of lower-profile growth companies deserving investigation. A good example is Inter Link Foods (LSE: ITF). The cake and pastry firm has witnessed its earnings more than double since 2000, with brokers predicting a further 50% improvement by 2006. Despite that record, the shares at 459p trade on a forward price to earnings (P/E) ratio of nine. Another AIM small-cap doing well is stockbroker Numis (LSE: NUM). Its record was blighted by losses during 2001, but profits rebounded strongly and are currently more than twice those recorded four years ago. Annual profits through to 2005 are expected to jump a further 100%, putting the 545p shares on a P/E of about eight. Aero Inventory (LSE: AI.), an aircraft parts service provider, also warrants a second glance. Following its 2000 flotation profits grew exponentially, although trouble struck earlier this year when 'timing issues' meant earnings originally due in 2004 were shifted back to 2005. Profits next year should be at least double those recorded in 2003 and the upbeat forecast puts the 290p shares on a 2005 P/E of eight. Where next? Discuss AIM Shares | AIM Share Tax Relief Maynard owns shares in the London Stock Exchange. He also tipped an AIM-listed share in the latest edition of the Motley Fool Value Investor newsletter.