In part 11 of this 2011 Performance mini-series, we turn to the UK AIM Index to examine its top 5 performers in 2011 including the share that gained a whopping 1450%!
We also reveal three other shares that could have bagged you a return of circa 900% had you bought and sold them at the right time!
I’ll be reviewing AIM‘s worst 5 performers on Friday, all of which lost more than 96% of their value, to see whether any of them are buying opportunities.
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The first thing to notice here is that the top performer, Quindell Portfolio with a gain of 1450%, performed 2.5 times better than the share in second position, UMC Energy, which still put in an incredible gain of 590%.
Indeed the share in 5th place advanced 393% during 2011 and when we review these shares, you will see that you could have done even better with these shares had you timed your buys/sells well.
Quindell Portfolio Up 1450%
The shares of this company only began trading on the AIM index on 17th May 2011 where they rocketed from 0.5p to 2.75p immediately.
After their dramatic entry the shares fell to 2p in early November before rocketing again to 7.5p by the year end.
The company has used the money gained from floating on the stock market to make several acquisitions which it is now in the process of melding into a cohesive business.
Early signs appear to be good with several contracts won in the last few months.
A December trading statement suggests the forthcoming results will be at the upper end of expectations, the current price valuing the shares on a Price/Earnings Ratio of 14.3 times.
If this company can continue to grow fast, then it could be worth a punt at this price but I am always cautious about new companies growing by acquisition.
I have never been successful investing in companies of this sort, losing money on several occasions, so I will be avoiding this one for the time being although you may feel differently?
UMC Energy Up 590%
This company is an explorer of uranium in Madagascar whose shares rose from 1.25p to 11.25p in October 2011 before falling back to 8.625p by the year end.
So a gain of 900% was possible with this share!
For the time being, the company has ceased operations in Madagascar until the political upheaval/uncertainty is resolved.
In the meantime, it has diversified and obtained two off-shore petroleum exploration opportunities.
This company is yet to make any revenue as it is a pure explorer at the present time.
Hence, expect the share price to be extremely volatile driven purely by the news flow and therefore is a share for the extremely brave.
PSG Solutions Up 456.4%
Shares in this company began the year at 19.5p before rocketing to 119.5p in November and falling back to 108.5p by the year-end.
The company has three divisions, the smaller ones being in flexible food/pharmaceutical packaging and home property searches/conveyancing.
The third division is a manufacturer of specialist electronic equipment for detecting eavesdropping/bugging devices.
It is this third business stream that is responsible for the share price gains having won a £48.7m contract in May 2011.
Unfortunately, this contract will complete by October 2012 and so future fortunes depend on similar contracts being won.
On a current Price to Earnings Ratio of 27 times, the share price seems to assume “the hits” will continue, which is by no means certain.
My other concern with this business is that the three business divisions are unrelated.
So, in summary, great 2011 but I can’t see a reason yet to buy the shares.
Sareum Holdings Up 400%
This company is a bio-technology company with a number of exciting cancer drug developments.
Starting the year with a share price of 0.28p, the shares jumped to 2.575p on positive trial results for two of its drugs for treating leukaemia and colon cancer.
That is a potential gain of 920%!
Since then, the share price has fallen back to 1.4p by the year-end after worries that it would run out of funding.
Exit of the Finance Director added to the worries which were only resolved by selling off its service business to raise cash.
Having retained its cancer drug development projects, the company is able to continue as a going concern but it will encounter a number of hurdles before bringing its drugs to market.
Realistically it needs a development and marketing partner.
Should it be able to attract a suitable partner, the shares would become a buy but until then, buying these shares would constitute a gamble.
TomCo Energy Up 392.9%
This is an oil & gas explorer that came onto the AIM market on 21st July 2011 whereupon its shares rose from 0.35p to 3.12p by November.
That is a gain of 891% in only 4 months!
The main reason for the sudden increase in share price was the announcement of a Joint Venture deal with a development partner operating close to its oil shale assets in Utah, USA.
Like UMC Energy, TomCo is a pure development company at present, not making any revenue.
It’s future therefore depends on it’s success in turning its oil prospects into a viable income stream without running out of cash in the meantime.
By the end of 2011, the share price had fallen back to 1.725p and are valued on a Price to Book Value of 2.8 times assets which is reasonable.
However, as before, its share price for the next few months at least (if not a lot longer) will be driven by newsflow and one for the brave.
Lessons Learned from the AIM Index in 2011
By looking at these few top performing shares in 2011 you should have concluded that their share prices can be extremely volatile and unpredictable.
All of these companies are in their early stages of development, none of them having a track record to speak of.
Probability suggests that not all companies of this sort are going to succeed.
However, buy the right shares at the right time and you can make a fortune!
Timing is key with shares of this type as is solid information on which to make your investment decisions.
So if you are tempted by any of these shares, make sure you do your own thorough research and, ideally, speak to the company before investing.
That’s it for this episode then – please let me know if you enjoyed the review.