A soaring FTSE small-cap tackling Covid-19 I think you should consider!

This Fool looks at a FTSE small cap company that has experienced massive share price growth due to its work on Covid-19 related solutions.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Global markets, including the Footsie, have been decimated by the Covid-19 pandemic. 

But there are companies out there that will attempt to combat the issue and a small-cap company doing just is Avacta (LSE:AVCT).

Covid response

Avacta is listed on AIM and may be little known, but it has a fairly long history (it’s been AIM-listed for close to 15 years). That’s an important point to note so don’t think it’s a ‘here today-gone tomorrow’ type of business. 

Biotech and health companies are at the forefront of attempting to tackle this virus and AVCT has established products that it’s now attempting to use in battling Covid-19. 

Testing

Avacta is a biotech company with two specific proprietary platforms. One of these is a targeted chemotherapy platform. And the other, which is relevant to Covid 19, is called Affimer. This platform offers an alternative to traditional antibodies and is derived from small human protein. 

AVCT has collaborated with two other organisations for separate products using its Affirmer platform. One of these has been to create a rapid testing solution. The other is to develop an antibody test. Both projects could be crucial in the fight against Covid 19.

Being a small organisation, Avacta’s work consists of a lot of collaboration with larger companies that need its platforms. In turn Avacta uses these other companies’ infrastructure and reach in certain areas. This is exactly what it has done for its Covid projects. 

Recent performance

Avacta has seen an increase of nearly 500% in its share price since the turn of the year. From 18.5p per share, it currently trades closer to 110p. That echoes the share price performance of some other Covid-19-linked small companies.

Earlier this month it released results for the 17 months to 31 December 2019 (17 months due to a change in its reporting period). The results looked promising to me. Revenue almost doubled compared to the previous full year, and its cash balance was up a healthy 70%. It also received a “milestone upfront payment” of $2.5m from one of its collaborators on a project that could be worth over $1bn long term.

Short-term risk or long-term reward?

What really excites me is the Affirmer platform in the fight against Covid-19. My research indicates its new method is groundbreaking in respect of antibodies. Such a platform could see AVCT’s standing in the industry grow rapidly.

This is a small-cap stock with some excellent projects in the pipeline. Some of these are directly related to a the Covid-19 pandemic.

It would be foolish of me not to note the risk involved here. Share prices have been surging for the many companies out there attempting to create Covid-19 vaccines and other solutions. Not all of these companies will succeed and prices could fall as fast as they’ve risen. The reason I like Avacta is that its original work on cancer treatment solutions will continue even if Covid-19 solutions don’t succeed. Avacta has many other projects in the pipeline so isn’t just banking on the coronavirus programmes. With the shares trading at just over 100p, I feel a small amount of money invested in this burgeoning small-cap could reap longer-term rewards. 


Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

ISA Individual Savings Account
Investing Articles

How to build a Stocks and Shares ISA with a 6% dividend yield

It’s easy to build an investment portfolio with a high dividend yield today. But investors need to manage risk carefully,…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How risky is switching from cash savings to a Stocks and Shares ISA?

The UK government is making moves to encourage cash savers to consider investing via Stocks and Shares ISAs. But what…

Read more »

Friends and sisters exploring the outdoors together in Cornwall. They are standing with their arms around each other at the coast.
Investing Articles

4,985 shares of this FTSE dividend star pay an income equal to the State Pension!

Zaven Boyrazian calculates how many shares investors would have to buy to generate enough income to match the UK State…

Read more »

Finger clicking a button marked 'Buy' on a keyboard
Investing Articles

£500 buys me 407 shares in this 8.2%-yielding income stock!

Got a small lump sum? Zaven Boyrazian explores one underappreciated income stock offering an enormous yield that could be set…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
Investing Articles

Up 23% this year, is it too late to buy shares in this FTSE 100 compounder?

Having missed Diploma shares at £36 back in April, is a strong trading update with higher guidance a good enough…

Read more »

Businessman hand flipping wooden block cube from 2024 to 2025 on coins
Investing Articles

Does this ex-penny stock have the potential to almost double?

This under-the-radar mining stock has doubled in the last 12 months, lifting it out of penny stock territory. But could…

Read more »

A mature adult sitting by a fireplace in a living room at home. She is wearing a yellow cardigan and spectacles.
Investing Articles

£5k in savings? Here’s how that can unlock a £255 monthly second income

Ever wondered how to turn a lump sum of savings into a chunky second income? Zaven Boyrazian explains a simple…

Read more »

British pound data
Investing Articles

Get ready for a US stock market crash?

Experts are waving the red flag on the US stock market and economy, warning of an impending crash. Should investors…

Read more »