We asked our freelance writers to share their top ideas for stocks listed on the Alternative Investment Market (AIM) with investors — here’s what they said for November!
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Gamma Communications
What it does: the company provides technology-based communication services across the UK and mainland Europe.
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By Kevin Godbold. Gamma Communications (LSE: GAMA) is a big beast by AIM standards with a market capitalisation of around £1.57bn. But it didn’t start that way.
The firm arrived on the FTSE AIM market 10 years ago and has since delivered and well-balanced growth in revenue, earnings, cash flow and dividends. Not all AIM stocks are rubbish as this rising star proves.
City analysts expect more growth ahead, and the firm’s recent acquisitive expansion into Germany may help to provide it. But as businesses grow, they also face risks. Gamma has been winning for a long time and is perhaps due a setback or two.
One possibility is well-financed competitors may start to bite into chunks of the firm’s profitable niche in the market. Or maybe Gamma will make an acquisition that goes bad.
Nevertheless, recent updates have been positive and the outlook is upbeat. I’d focus on the growing business now.
Kevin Godbold does not own shares in Gamma Communications.
YouGov
What it does: YouGov is a market research company, with most of its revenue from the USA.
By Alan Oscroft. A few AIM stocks have struggled this year, with YouGov (LSE: YOU) one of the worst performers.
In June, the company warned that full-year earnings were likely to be 32% below the analyst consensus at the time. The shares crashed, and despite a few hints of life in the months after, they’re down near a 52-week low now.
My main fear is that we could get more bad news, as we might see more slowing demand across the sector.
But analysts expect solid earnings growth next year, even after downgrades. And they don’t think the dividend will suffer, though there’s only a 2.2% forecast yield.
We could be looking at a price-to-earnings (P/E) of 16.5 in 2025, dropping to under 12 by 2026.
AIM sentiment isn’t strong, so the short-term future could be erratic. But I see an attractive long-term valuation here.
With YouGov boosting its use of artificial intelligence, it might just be the one to put the AI into AIM.
Alan Oscroft has no position in YouGov.
Warpaint
What it does: Warpaint makes colour cosmetics under the W7 and Technic brands. It sells them at Tesco and major retailers in the US and Europe, plus its own website.
By Harvey Jones. The vast majority of my portfolio is culled from the FTSE 100, alongside a smattering from the FTSE 250. I hold just one AIM-listed stock but I chose well because it’s a goodie: Warpaint London (LSE: W7L).
Shares in the specialist supplier of colour cosmetics are up 80.16% in the last 12 months, and a blockbuster 614.84% over five years.
I bought Warpaint after spotting that it had repeatedly hiked earnings guidance, boasted ample cash reserves, no debt and a strong dividend track record.
On 17 September, I was pleased to see it post a 66% jump in first-half earnings to £12m, with group pre-tax profits up 76% to £10.9m.
The Warpaint share price jumped on the news, but has trailed downwards along with the rest of the AIM. Possibly because investors fear the Budget will hit inheritance tax breaks for the index.
Warpaint shares aren’t cheap, trading at 30.16 times earnings. The yield is just 1.67% but that’s largely down to the rocketing share price. I’m hoping sales will jump again as the cost-of-living crisis eases, unless consumers trade up to pricier brands when they feel a bit more flush. I doubt it, though. I’ll use the dip to top up my stake in November.
Harvey Jones owns shares in Warpaint.
Yü Group
What it does: Yü is an independent supplier of gas and electricity to businesses across the UK, and a smart metre installer.
By Edward Sheldon, CFA. Yü (LSE: YU.) shares look really interesting to me right now. There are several reasons why.
The first is that the company has been generating phenomenal top and bottom-line growth recently. In the first half of 2024, revenues grew 60% to £313m while earnings per share jumped 52% to 88p.
The second is that the dividend is being increased at an unbelievable rate. For H1, the payout was increased by a whopping 533% to 19p. Currently, the yield is around 3.5%.
Another reason is that the shares look dirt cheap. As I write this, the company’s price-to-earnings (P/E) ratio is just eight.
In terms of risks, there are a few to be aware of. Yü operates in a competitive market. Meanwhile, it has no control over energy prices.
I think the shares are worth a closer look right now, however. Given the low valuation and rising dividend yield, there’s a lot to like.
Edward Sheldon has no position in Yü Group.
