Look to the future! I’d buy these AIM stocks today

AIM stocks are often risky investments, but they can also see tremendous gains. One Fool looks at his top picks within the AIM market.

| 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.

Investing in the AIM market certainly has its risks. The companies are often much smaller than those listed on London’s main market, and they face less regulatory scrutiny. This means that AIM stocks can make heavy losses in a small period of time. Nevertheless, the AIM market can also be very lucrative if you’re discerning when picking stocks. I believe that these particular AIM stocks are the best picks.

A less risky AIM stock

Bioventix (LSE: BVXP) is the first AIM stock that I particularly like. The biotechnology company is involved in the development and supply of antibodies. It has seen tremendous growth over the past few years, with earnings increasing from £1.6m in 2014 to £6.5m last year. Recent interim results saw pre-tax profits rise 31% over the six months to the end of December 2019.

The firm also pays a strong and healthy dividend. Thanks to a highly cash-generative model, it currently yields over 2%, and has been consistently growing. In fact, the interim dividend was recently raised by 20%, despite the poor economic climate. As such, I can see Bioventix become one of the big dividend payers of the future.

My only issue with this AIM stock is its pricy valuation. Although its price-to-earnings ratio of 32 is not overly expensive in comparison to other biotechnology companies, a price-to-book ratio of 22 is significantly higher than the market average of 1.3. Even so, quality stocks such as these are going to be more expensive. With no debt, an ever-growing dividend, and profit margins of nearly 70%, I believe it’s worth every penny.

A market leader in US healthcare

Craneware (LSE: CRW) provides software to US hospitals to help them manage patient billing and costs. There are many reasons why I like this AIM stock. Firstly, it has an extremely robust balance sheet. This includes no debt, cash reserves of nearly $50m and undrawn debt facilities of $50m. As a result, the company should be able to capitalise on any market opportunities that arise. I also like the fact that the CEO and founder of the company, Keith Neilson, is also the second-largest shareholder. This demonstrates strong commitment to the firm, and management is evidently experienced.

Once again, there are problems to underline. For example, the share price was punished in 2019 when growth temporarily stalled. As a result, Craneware shares are trading at a discount of over 50% from the all-time high. But with a large number of recurring revenues, and limited impacts from the pandemic, it looks set to gain back these losses in the coming years.

All in all, I’d buy both these AIM stocks. While the AIM market can often be risky and unpredictable, both these stocks seem safer options. With both paying decent dividends already, they could also become the income stocks of the future.

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 considered so you should consider taking independent financial advice.

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has recommended Bioventix and Craneware. 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

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

2 of the best stocks to buy now with £500

I think that Berkshire Hathaway and Activision Blizzard are two of the best shares to buy today. I think they…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

I bought 10 cheap shares. Here’s what happened next

After recent price falls, we bought 10 cheap shares for extra passive income in future. This mini-portfolio offers a tasty…

Read more »

Close up view of Electric Car charging and field background
Investing Articles

Is now a good time to buy Chinese EV stocks as economic growth slows?

Chinese EV stocks tend to trade at a considerable discount to their US counterparts. And that's one reason I like…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

I’d happily start investing in today’s stock market – here’s why

The stock market has been moving up even as the economy has been looking shakier. Would our writer start investing…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Up 22% in a month! This FTSE 100 takeover target could rise further

A takeover bid for an FTSE 100 firm is big news. Here's what I'm doing about RS Group shares after…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Income shares could help me turn £300 into £500. Here’s how

Our writer believes investing in the right income shares over the long term could be lucrative. Here is his approach.

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

I bought these FTSE 250 shares for fat dividends!

These two FTSE 250 shares have gained in value since I bought them recently. But I still see these stocks…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

Should I buy this REIT to add to the others that pay me juicy dividends?

Jabran Khan looks closer at this real estate investment trust (REIT) and decides if he would add the shares to…

Read more »