Roy Mitchell picks five shares for this year.
In 2005 I entered a share-picking competition called the UK Stock Challenge and was lucky enough to be placed 1/274. My 5 shares showed an average increase of 130%. I emphasise the word lucky as the range for my five shares was + 457% to -100%.
In 2006 I came 50/292 with an average rise of 22%, the range being +123% to -62%
Whilst these competitions should only be seen as a bit of fun, they do make you very aware of the risk/reward ratio of a share and this was an important point in making my 2007 selections.
Here they are:
Aortech
(LSE: AOR)
Aortech's main product is Elast-eon, a patented high silicone content polyuretherane copolymer. In 2006, the US FDA granted approval for the use of Elast-eon in certain medical procedures and a number of contracts were signed.
I think there's a strong chance that Aortech will announce a significant 2007 deal to further develop Elast-eon for breast implants.
I'm hoping for potential growth of 50-100% here with possible downside of 25-30%.
Microemissive
(LSE: MED)
Microemissive claims to be the world's leading developer of polymer organic light emitting based micro displays. These products allow high-quality pictures allied with low power consumption.
The share price fell by 62% in 2006, and there was a cash call to finance the construction of a manufacturing plant in Germany. However, a few days before the end of 2006 the company announced a £2m contract and was confident that more contracts wins would follow.
This is a share that could multi-bag or burst in 2007.
Porvair
(LSE: PRV)
Porvair describes itself as a specialist filtration and environmental technologies group. It has a sound basic business and the potential for additional growth from its Advanced Materials division which includes bipolar plates for fuel cells.
At one stage in 2006 the share price had risen 40% but that was all gone by year end. In 2007 I would look for at least 30-50% growth and see downside of no more than 20%.
Sinclair Pharma
(LSE: SPH)
Sinclair is an oral hygiene and skincare specialist. Rather than incur heavy costs and face lengthy time frames though blue sky R&D, it acquires products which have passed certain hurdles.
To date it has 13 product registrations in the EU and 9 in the US, and has sales and marketing agreements in more than 50 countries.
It completed a number of critical deals in 2006 and the announcement that it will move from Aim to the main market -- as well as listing on Euronext -- gives me confidence that the shares have the potential for significant growth.
I am looking for 40-60% gains here, and see limited downside, say 15-20%
Volvere
(LSE: VLE)
Volvere is an illiquid stock market venture capital company which has acquired a number of businesses in recent years.
There is the downside protection through net asset value (NAV) equalling the current share price and cash representing over 80% of NAV.
Potential upside comes from an aggressive management and existing businesses which should move into profit in 2007. The key to success, however, will be future deals; the right one could see significant upward movement in the share price.
50-100% growth is my target and with that solid cash base I find it hard to see downside of more than 15%.
Please note that I own shares in all five of these companies, and I stress that this is a high-risk portfolio. If stock markets tumble, some of these companies might suffer unduly, and my potential downside estimates might prove to be too optimistic.
But then if this portfolio is to have any chance of delivering a top quartile finish in the competition, it has to be risky.
More: Big Rewards From Medium Risk | Cooking Up A New Investment Style
Roy owns shares in Aortech, Microemissive, Porvair, Sinclair Pharma and Volvere
