The last few months have seen several newly-listed stocks with initially promising-looking growth strategies perform poorly. Investment platform AJ Bell (LSE: AJB) has been a pleasant exception. Since coming to the market in December, the stock had increased almost 30% in value before today.
As such, it’s no surprise that this morning’s trading statement for Q1 of its financial year has attracted attention.
Despite recent volatility in the markets, the number of customers using AJ Bell’s services increased by 4% over the three months to the end of 2018. Over 190,000 people now use the company for their investment needs. Inflows also increased by 20% to £1.2bn compared to the same three-month period in 2017.
That said, recent volatility in the market has seen a 4% decline in assets under administration to £44.2bn (although this does compare favourably to the 11% fall seen the FTSE All-Share index). The number of defined benefit pension transfers also fell compared to the previous year and the fall is “expected to continue” during 2019.
However, there are reasons to be bullish.
With the Financial Conduct Authority (FCA) expected to report back on its Investment Platforms Market study in due course, CEO Andy Bell stated that his company’s focus on proving value for money and good service should mean that AJ Bell is “well-positioned to benefit from anticipated developments in these areas”.
With the end of the fiscal year fast approaching, I suspect the next quarter will also show similar inflow growth as people rush to open and contribute to ISAs before the April 6 deadline.
AJ Bell’s share were flat in early trading, suggesting that today’s update was exactly what market participants were expecting. After many IPO disasters in recent times, that’s no bad thing in my book.
That said, I’m inclined to wait for things to cool a little before building a position. A trailing price-to-earnings (P/E) ratio of 48 (according to Stockopedia) is too high for me right now.
Also reporting today was chocolatier and retailer Hotel Chocolat (LSE: HOTC).
It may be a million miles away from AJ Bell’s world, but the small-cap — the subject of a Channel 5 documentary a few days ago — could be another great pick.
Total revenue for the 13 weeks to 30 December was 15% higher than the previous year with growth seen in all of the firm’s channels (retail, digital and wholesale).
Bucking the trend seen at many companies with a high street presence, CEO Angus Thirlwell reflected that it had been “another strong Christmas” for the Royston-based business, with new store openings — 15 in the second half of 2018 — contributing 5% of the growth seen over the period.
New locations in New York and Tokyo have also been well-received, according to the company, helping to demonstrate the company’s “ability to travel overseas“.
In addition to this, Hotel Chocolat added an encouraging 400,000 members to its loyalty scheme over the reporting period and sold over three times more Velvetiser hot chocolate-making machines than originally predicted. All positive developments, in my opinion.
Considering trading since December has been “in line with management expectations“, I’d be surprised if the share price didn’t hold its own until February’s interim results (ignoring macro-economic factors).
The only problem is that Hotel Chocolat’s shares were highly rated even before today’s 5%+ price rise (on 27 times expected earnings).
Again, I’d be inclined to wait for a pullback before buying in.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hotel Chocolat. 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.