The junior market has a reputation for being a risky place for investors to tread. Carefully selected however, I think there are more than a few diamonds in the rough. Here are three AIM stocks I’d be happy to buy before the month’s out, despite their rising price tags.
Strix
As I type, shares in kettle safety device manufacturer Strix (LSE: KETL) are up 70% over the last year. That’s a superb return for what is, admittedly, not the most exciting of businesses. In fact, KETL has been a winning AIM stock since coming to the market. In four years, the shares are up 173%.
This momentum might just continue. In July, the company said it was now expecting to deliver revenue growth of 50% or so for the first half of 2021, and roughly 30% for the year as a whole. Any improvement to the latter when interim numbers are confirmed in September should do the share price no harm.
I’m not the only one bullish on Strix either. Earlier this month, analysts at Liberum said the company was primed for a re-rating, due to the potential earnings growth on offer.
Of course, there’s a chance the shares could lose steam at some point. Early holders may want to bank some profit, for example. Even so, a valuation of 24 times forecast earnings still doesn’t feel unreasonable. The solid dividend stream compensates me for choppier times too.
Inspecs
Eyewear manufacturer and distributor Inspecs (LSE: SPEC) is another AIM stock I’d buy now. Its shares are up 51% in value over the last year. In its 18 months as a listed company, SPEC has returned 86%.
All this is rather impressive considering Inspecs came to market at the worst possible time. Due to Covid, group revenue fell almost 25% to $47.4m in 2020. The firm also reported a post-tax loss of $8.9m.
Still, next month’s interim figures should be more encouraging. Inspecs has certainly been preparing itself for better times by snapping up lens maker Norville and manufacturer Eschenback. It’s also been adding new global brand licences to its portfolio.
Yes, a P/E of 30 is getting punchy and shares are less liquid than those of other companies (meaning price moves could be more pronounced). However, I think the ‘essential’ nature of its products makes up for this risk.
Mortgage Advice Bureau
A final AIM stock worth buying in advance of September is Mortgage Advice Bureau (LSE: MAB1). As one might expect, trading has been excellent of late, thanks to a booming UK housing market. However, shares now trade on 39 times earnings, having climbed 123% in value in 12 months. Is this too high?
It’s certainly not cheap. Then again, recent demand for housing (and, by association, MAB’s services) surely won’t grind to a halt. More people are wanting to work from home, after all. Moreover, I’d be shocked if next month’s interim results were anything but great.
As a (mostly) buy-and-hold investor, I also think it’s important not to base an investment decision purely on a single metric. Expensive stocks can continue going up if they can carry on growing. As an aside, returns on capital are high and the firm has net cash on its balance sheet — just the sort of things I look for.
MAB’s still a buy for me.
