AIMing low
Posted on April 4, 2007 by Richard Beddard
Filed Under Investing |
What’s AIM good for? In the war of letters between Clara Furse and Neal Wolkoff, where the London Stock Exchange trumpets AIM’s success and the American Stock Exchange wishes it was free to emulate it, they’re not mentioning one thing. Although AIM has helped London overtake New York as a place to raise money, it’s been less of a success for investors:
If you’d invested £1,000 in London’s AIM All-Share Index when it was born in 1996 you would have made about £146 at last Friday’s close, a return of 15%. Over the same period you’d have made 79% in the FTSE All-Share Index, 123% in the NASDAQ Composite Index, and 151% in the New York Composite Index.
Although AIM is for smaller, younger companies and these indexes are dominated by big ‘uns, AIMs lacklustre performance isn’t down to its constituents’ size. In the same period the FTSE Small-Cap Index, the smaller company segment of the main market, rose 93%, more than the FTSE 100’s 70%.
Perhaps it’s the quality of the companies? Paging through the stocks on AIM it’s remarkable how many are unprofitable. In his letter, Wolkoff referred to comments made by Roel Campos of the Securities and Exchanges Commission in which he may or may not have compared AIM to a casino. Perhaps the next 11 years of AIM will be different. But going on it’s first eleven years, it seems AIM’s American detractors have a point, even if they express it too forcefully. A positive return is better than a casino but it appears that, relative to AIM, even elephants gallop.
Footnotes:
- Investors would have received dividends too, I haven’t included them.
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3 Responses to “AIMing low”
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Aim is good for allowing small firms to IPO for small amounts of cash. However, as AIM is so open to malipulation I often feel it may be better for companies to get this cash to traditional venture capital.
AIM is there to help those who want to help themselves, or bet on long odds, its a gamble rather than an investment.
But I must admit at least you know who are going to be the winners on this market, and it’s not the investors.
Its the MM, Brokers, and those in charge of the companies that transfer to AIM or come to AIM from abroad, why because there is less rules there fore less chance of getting caught if things go wrong and it does on a regular bases
Having bashed AIM - I feel a bit guilty now
I can see why you are sceptical but I’ve done well out of various AIM stocks. I wouldn’t to tar them all with the same brush even though as a group they’ve done badly. As I hinted in the original blog being more selective may be as simple as looking for established (i.e. profitable, listed for a number of years…) companies.
I remember when it was the ambition of AIM companies to ‘graduate’ to the main market. Then smaller companies on the main market started ‘downshifting’ to AIM because of its lower costs. Perhaps better AIM companies will start thinking about the main market - for the sake of their reputations!
Thanks for passing by