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magazineNine small caps tipped to ‘outperform’
A handful of technology stocks, a make-up supplier, a mortgage adviser and a pharmaceutical firm are among a list of smaller company shares expected perform strongly over the coming few months.
The nine featured companies are highlights from a quantitative number-crunching exercise conducted by analysts at N+1 Singer.
The stockbroker regularly scans the lower end of the market cap spectrum for momentum-driven stock ideas using technical analysis.
The analysts periodically refresh their selections based on accelerating or decelerating share price momentum.
N+1 Singer explains that it had started to note in January a very interesting subset of stocks in the screening exercise. ‘It looks like sharply increasing and reducing price momentum could be a worthwhile differentiator of relative performance,’ the broker explains.
‘Since the last refresh the screen has significantly outperformed both the main small-cap and micro-cap indices against a background of strong and stable momentum generally.’
On a weighted basis, which gives higher value to stocks for higher market value, N+1’s screen seems to have performed impressively, beating the main small cap and micro-cap indices by 16.8% and 10.8%, the broker says.
On an unweighted basis (which treats all stocks equally regardless of market capitalisation), the outperformance was less but still significant, at 10.6% and 4.6%.
Summer hotshots
Of N+1’s nine selections this time round, only computer gaming event organiser Gfinity (GFIN:AIM) remains from the January list.
The data is essentially telling the broker’s analysts that more share price upside could be on the cards short-term despite the stock’s 32% rally since 10 January.
New names on the latest list include financial risk analysis software company Lombard Risk Management (LRM:AIM) and Statpro (SOG:AIM), which provides a software platform to asset managers. Both have recently issued positive news.
Digital coupons business Eagle Eye Solutions (EYE:AIM), which has former Tesco (TSCO) chief executive Terry Leahy on its board (he also owns an 8.8% stake), grabs a place on the list; so does electronic components designer Stadium (SDM:AIM).
Make-up supplier Warpaint (W7L:AIM), which only joined AIM in November 2016 at 97p, is on the list despite its shares soaring to 275p in just seven months. Loss-making biotech hopeful Faron Pharmaceuticals (FARN:AIM) joins ahead of Phase III trials for Traumakine, its acute respiratory distress syndrome treatment.
Ingredients business Treatt (TET) and property funding adviser Mortgage Advice Bureau (MAB1:AIM) complete the list of nine.
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