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Best AIM Shares to Buy Right Now

Updated 27 Jun 2022
best aim shares to buy

AIM shares are high risk high reward and in this guide, we’ll explore everything you need to know about AIM shares.

This includes how to trade them as safely as possible, what you need to do to see the best returns possible out of the market, and most importantly the best AIM shares on the market at the moment.

What Are AIM Shares

The AIM or ‘alternative investment market’ is a sub-market of the London Stock Exchange (LSE) that was launched in June 1995.

The AIM enables small and medium-sized companies to raise capital via a listing on a public exchange, which, in turn, helps them to grow at a faster pace. However, regulation and listing procedures are less stringent than they are for stocks such as the blue chips in the FTSE 100. This is because complying with all the top-tier requirements is costly and a considerable cost burden for smaller firms, so a light-touch compromise has been achieved. To achieve a ‘full listing’ on the LSE, a firm must have existed for at least three years and a minimum of 25% of its share capital must be free-floating. AIM-listed stocks are not required to meet these conditions and as a result, are seen as riskier investments.

There are also several well-known companies listed. For example, the largest company by market capitalisation is Boohoo Group, which is valued at £1.04bn, while other household names such as YouGov and Fevertree Drinks PLC are also AIM stocks.

The launch of the AIM saw 10 companies listed with a combined valuation of approximately £82m. It now has around 839 companies listed and a total valuation running into tens of billions of pounds.

Best AIM Shares to Buy

So, what are the best AIM shares to buy? Here are some of the best ones:

  1. Kape Technologies
  2. AB Dynamics
  3. Boohoo

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eToro is the world’s leading social trading and investing platform and is a great choice for trading AIM shares. Its platform is very user friendly, and with 0% commission to pay, it is a great choice.

Kape Technologies (LON: KAPE)

Kape Technologies is a UK cybersecurity firm that provides consumers digital security software. The company has a presence in 10 cities globally, including Paris, London, Hong Kong, and Austin, while it employs around 850 people. The company's most well-known product is ExpressVPN.

While its latest earnings report came in below some expectations, according to one recent report, analysts still expect revenues in 2022 to grow 169% year-over-year. In addition, the company said that “ongoing global uncertainty continues to result in an increasing awareness from individuals of the requirement to protect their digital profiles,” which may help the company.

Meanwhile, Kape's management is confident that it will achieve revenues of between $610 million to $624 million in 2022.

Kape Technologies Share Price – Daily Chart – April 2018 – June 2022

Kape Technologies Share Price 2022

Source: IG

AB Dynamics

AB Dynamics (LON: ABDP) is a supplier of automotive test systems to both UK and overseas car producers. The company was initially founded in 1982 as a vehicle engineering consultancy but has continued to grow steadily over the years and now has a market capitalisation of £245m.

AB Dynamics has two main segments to its business: track-testing, and laboratory and simulation testing. In recent years, the firm’s track-testing segment, which is its primary revenue driver, has grown significantly in the US. It also saw further development in the simulation sector.

The stock price has a high beta, meaning that over time, ABDP overshoots to the upside and downside more than the market average. That opens the door to buying the dips.

The fundamentals of the company are strong due to self-driving technology being a growth sector. The current P/E ratio of the stock is a relatively high 67.2, which reveals investors in the stock are basing their decision on future rather than current revenue streams.

AB Dynamics Share Price – Daily Chart – April 2018 – April 2022

ab dynamics daily chart

Source: IG

AB’s share price suffered during the Covid pandemic and subsequent lockdowns due to orders being postponed as parts of the global logistical network ground to a halt. While this has obviously been a setback, the firm has weathered the storm and, like 4S Pharma, has formed a double-bottom price pattern, indicating that investors see the base level share price of ABDP being in the region of 958p.

Boohoo Group PLC

Online fashion retailer Boohoo (LON: BOO) has been something of a rollercoaster ride for investors and highlights the extreme price volatility that can be expected from stocks in the market. Between March and June of 2020, the BOO share price surged by more than 162%. Then between April 2021 and April 2022, the stock gave up more than 74% of its value.

Now trading back at lower price levels, Boohoo provides a perfect example of the need to dedicate time and research when investing in AIM stocks. In Boohoo’s case, it’s a matter of balancing negative press reports regarding business practices against the fact that the firm’s business model has a proven track record in terms of revenue streams.

The firm has moved to address allegations of poor working conditions for its employees but press reports on the subject have driven the share price down. The claims that employees were underpaid and exposed to dangerous working conditions led to auditor PwC deciding to cut ties with the firm. The fact that that ‘big 4’ auditor was replaced by a much smaller accountancy firm, PKF Littlejohn, alarmed investors and created selling pressure. It also offers a reminder about the risk that governance structures at AIM firms may not be as stringent as those at larger firms.

Boohoo management has cut ties with some suppliers and halted its subcontracting operations. It has also recently completed the takeover of Dorothy Perkins, Wallis, and Burton, three brands previously under Arcadia Group.

Upside potential for the firm is based on its established customer base. If it can iron out the operational problems, then the online market Boohoo appeals to could even expand thanks to Covid lockdowns changing consumer habits, benefiting firms such as Boohoo which operate solely online.

Boohoo Group Share Price – Daily Chart – April 2018 – April 2022 – Strong Revenue Stream

boohoo group daily chart strong revenue stream

Source: IG

Boohoo remains one of the highest-profile AIM stocks to watch, but make sure to keep an eye on the potential for an online sales tax. Online and offline retailers have called for a level playing field, and it’s something that could disrupt Boohoo’s business.


How to Buy AIM Shares

AIM shares aren’t for everyone, but if allocating some of your capital to a high risk-return sector is for you, the good news is that the process of opening an account and booking your first trade can take only minutes to complete.

  1. Find a broker to buy AIM shares through. You can do this easily by comparing names on this list ofthe best stockbrokers. Each broker has been reviewed by AskTraders analysts to ensure they offer clients the regulatory protection and support services needed to make a success out of trading AIM stocks.
  2. Once you've found a broker, deposit funds into your account.
  3. Find the company you want to buy shares in.
  4. Enter the quantity of shares you want to purchase.
  5. Finally, click the submit button to confirm your purchase.

To make this process easier for you, we've provided a shortlist of our favourite brokers to buy AIM shares with below:

Best Brokers to buy AIM shares

eToro: 68% of retail CFD accounts lose money

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Tickmill: FCA Regulated

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IG: Over 16k stocks to trade

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From 0% commission to low trading fees and top-tier regulation, these brokers are best-in-class when it comes to buying and selling AIM shares.

Why You Should Buy AIM Shares

The AIM market offers an opportunity to invest in companies that can’t be found anywhere else.

Purchase Shares in Young, Growing Companies

Buying shares of companies listed on the AIM market provides a fantastic opportunity to invest in young and small-cap growth companies with the potential to be the next big thing.

However, finding those companies is the tricky part, but if you are lucky enough to manage it, then the potential return on your investment can be enormous compared to other asset classes.

Rapid Growth Potential

While there are many young and growing companies within the AIM market, there are also companies that have already seen rapid growth.

The case of Boohoo Group, a company that has been labelled the “king of AIM”, demonstrates how quickly prices can move. Your investment decisions regarding AIM stocks are likely to be confirmed right or wrong faster than they are in other markets.

Cheap Share Prices

Now, of course, everyone is after a deal, and investing in an AIM-listed company represents the opportunity to purchase shares at a very reasonable price.

Shares in Greatland Gold (LON: GGP) can be bought for pennies but increased in value by more than 1,500% in 2020.

What to Consider Before Investing in AIM Shares

There are a lot of companies listed on the market with shares trading at low prices. Just keep in mind that many are cheap for a reason.

Governance Risk

Investing in AIM companies comes with a higher risk due to the more relaxed listing requirements, meaning that they attract a particular type of company. For example, to be listed on the primary market, such as the FTSE 100 or 250, a company will need to provide a track record of audited financial records over a specified number of years.

However, listing on the AIM market does not require such an extensive track record, and so, it inherently means that companies listed will be riskier.

Price Volatility

AIM shares can be highly volatile, and it is not out of the norm for a company in the AIM to see big swings in price each day. This means that while there is the potential for big profits, there is also the potential for large losses, so it is essential to consider that when purchasing shares.

Research

The most important thing to do when you consider investing in an AIM company is to conduct thorough research beforehand. There are many examples of AIM companies failing after a brief period of relative success, so research will be key to help avoid that trap.

Many of the companies listed are also losing money, so it is vital that you find out as much as possible about the company before you decided to invest.

Buyer Beware

It is estimated that a total of 2,877 companies have listed on AIM. In more than 30% of cases, investors have lost more than 95% of their investment. This means there is obviously a risk that management teams and founders of firms list on AIM with the intention of selling on their position to the general public.

Other sources of funding are available to small and growing firms, but private equity teams, for example, carry out extensive due diligence on potential targets, which makes the general public an easier target when unscrupulous business owners are looking to offload stock.

CFD or Equity

CFDs have functionality, which makes them ideal for short-term trading strategies, but if you’re looking for buy-and-hold opportunities, it can be more cost-effective to hold your position in a share-dealing account. The pros and cons of CFDs are discussed in more detail here.

Trade the Index

Single stock risk can be mitigated by trading the entire AIM index. Brokers such as IG offer the opportunity to gain exposure to all the AIM-listed stocks with the click of just one button.

Greatland Gold Share Price – Weekly Chart – October 2018 – April 2022 – +1500%

greatland gold weekly chart

Source: IG

Final Thoughts

All stock exchanges set out to offer the same service – to be a place where investors and firms can meet. In the case of the AIM, the investors tend to be more risk orientated, and the companies involved tend to offer greater risk return.

The relatively ‘light touch’ in terms of rules and regulations of AIM stocks is something that needs to be factored in, but it is not the Wild West. A more obvious and very real risk is that the value of your holding in an AIM stock might crash and potentially hit zero.

Few experienced investors would recommend going ‘all in’ on AIM stocks, but the potential for a ‘moon shot’ style investment means many investors allocate a small percentage of their capital to AIM-style stocks. One risk that can be managed effectively is making sure your broker is reliable and trusted. Head to this chart of good brokers who have been reviewed by the AskTraders team to ensure they offer strong regulatory protection to clients and the support traders need to make a success out of trading.