Have Paul Hill's small cap gambles paid off?

In this final article of 2006, it's time to update our Gamble of the week' tips. Most are high-risk, Aim-listed, small caps, which can reward more adventurous investors and overall we've done well. Of 28 tips, 18 now trade higher than their tip prices, with one unmoved a 69% hit rate. The average gain is 15.5%, against a drop of 7.2% in Aim over the same period. Which should you hold, and where should you take profits? Here are my updates, in the order in which they originally appeared in the magazine.

Pixology (PIX), the digital photography software developer, supplies Tesco, Asda and Jessops, but has yet to make a profit. The industry is getting more competitive, which has impacted performance. But there is value in both its technology and its blue-chip customer base, as two takeover approaches this year show.

Update: HOLD at 28p, and await news

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Surgical Innovations (SUN) is a keyhole surgery equipment specialist. September's interims were upbeat: sales rose 48% to £2.1m, with record orders. A "substantial increase in operating profit" is expected in the second half.

Update: HOLD at 3.5p

Tenon (AIM: TNO) was a turnaround play, and has been the star performer, up 160%. The UK-based group provides financial services to owner-managed firms with turnovers of £2m to £20m. Core activities are tax advice, audit, corporate recovery and M&A. A new CEO and CFO joined in January, profits and turnover are growing at record rates, and the shares have soared. While still good value on a forward p/e of 11.4, it is time to bank some profits: I expect its markets to become tougher going forward.

Update: SELL at 52p

Gladstone (AIM: GLD) develops membership software for health and fitness clubs and has a 20-25% share of the UK market. Clients include Holmes Place, JJB Sports and Bannatyne Fitness. It reported solid numbers in November, with 40% of revenue now recurring, and underlying earnings per share up 47% to 2.6p. The shares are on a p/e of 10; the balance sheet is strong with £4.7m of cash and a £2m freehold property.

Update: HOLD at 25p

InTechnology (AIM: ITO) is another turnaround play. It is recovering in tough conditions and has sold its UK IT distribution unit for £41m to focus on IT-managed services, which generate higher margins and more stable returns. But the sector is tough, and success may hinge on further acquisitions to generate economies of scale. The shares are cheap on a p/e of 10, but the core business may lack critical mass in a harsh climate.

Update: SELL at 43p

Amiad Filtration (AIM: AFS) makes water filtration products for industry and agriculture. Based in Israel, it sells globally. But interims were disappointing. Industry prospects are good, but Amiad's short-term valuation looks stretched.

Update: SELL at 148p

Inion Oy (LON:IIN) is the worst performer, down 50%. It has developed a range of biodegradable medical implants for the orthopaedics market, which degrade over set time periods, helping to heal broken bones without the need for further operations to remove metal plates. The group has failed to commercialise the technology properly but recent changes to senior management may help it crack this, in which case prospects look bright.

Update: HOLD at 26p

RC Group (AIM: RCG) provides integrated biometrics and RFID' security tracking devices. Strong results, new deals and investor optimism have seen the stock almost double since being tipped. But while it's a quality business, its markets are becoming more competitive. Time to bank some profits.

Update: SELL at 89p

Datong Electronics (AIM: DTE) designs high-performance intelligence-gathering equipment. December's interims met City hopes: turnover was up 39% to £3.4m, with its markets still buoyant. The shares remain attractive on a forward p/e of 10.

Update: BUY at 100p

Theratase (LON:THE) is a top manufacturer of high quality specialist enzymes for medical diagnostics. Last week it received a bid approach, sending the shares up 18%. The bid is still in its early stages, but could flush out other interested parties.

Update: HOLD at 68p and await news.

DDD (AIM: DDD) is a 3D software developer for the mobile phone and film industry. Its innovative software seems slightly ahead of the curve, and the group has struggled to get customers to adopt it. This time lag between developing and commercialising early-stage, hi-tech applications is common. But crucially, the technology works, so while painful in the short term, long-term prospects are rosier. The firm recently raised £1.6m at 10p.

Update: HOLD at 10p

International Marketing and Sales (AIM: IMSG) is a sales and marketing group focusing on emerging markets. In August it said its core Russian unit had been hit by two law changes introduced earlier this year. The profit warning sent shares crashing 50% to lows of 75p. This was an over-reaction; part of the problem is temporary, and IMSG saw organic growth of more than 40% in the first half. At 105p, the shares trade on forward p/e ratios of 16 and 11 for this year and next, good value for such a high growth stock. The directors think so too, and recently bought in.

Update: HOLD at 103p

Image Scan Holdings (AIM: IGE) is a leader in the field of 3D X-ray imaging for the homeland security (eg airports) and industrial inspection (eg British Nuclear Group) markets. It has a growing order book and trading remains strong in buoyant markets. But the shares are up 45%, leaving the valuation looking toppy so it's time to take profits.

Update: SELL at 30p

ServicePower Technologies (AIM: SVR) supplies field engineer scheduling software to GE Appliances, Argos Direct and BSkyB, among others. In November it issued a surprise profits warning due to delays in signing up new licencees, and the closure of its EchoStar unit. But the sales pipeline is strong and it won an £800,000 a year deal with Empire Commercial last week. The CEO and chairman have topped up their holdings.

Update : HOLD at 17p

MTI Wireless Edge (AIM: MWE) is the world market leader (with about a 25% share) in the manufacture of flat panel antennae for fixed wireless broadband and RFID tracking devices. Third-quarter results met City hopes, and research suggests its markets will remain strong.

Update: BUY at 46p

SmartFocus Group (AIM: STF) develops online marketing software. Its main application allows marketers to interrogate huge databases, predict customer response rates to promotions and gauge campaign performance. First-half growth was encouraging, with revenues up 73% to £3.8m, and a solid order book for the rest of 2006. At 15.5p the shares trade on undemanding p/e ratios of 13 and 9 for this year and next.

Update: BUY at 16p

International Nuclear Solutions (AIM: INS) is one of the largest UK engineers that decommissions, processes and stores nuclear material. Solid results, industry optimism and engineering woes at British Energy have pushed the shares up. They now look fully priced.

Update: SELL at 52p

Highway Insurance (AIM: HWY), a UK motor insurer, stated at interims that it expects at least to maintain the full year dividend at 5.3p per share. The chairman added that while conditions in the markets remain challenging, "Highway is well positioned to take advantage of an upturn" when it comes.

Update: HOLD at 73p for the 7% divi yield

Careforce (AIM: CFG) provides home care for the elderly and disabled. Most sales (80%) are via outsourcing deals with local authorities, but services are also offered privately. Still good value on a forward p/e of 12.

Update: BUY at 105p.

OpSec Security (AIM: OSG) is a top provider of anti-counterfeiting and brand protection services. Record first-half profits have pushed the stock up 21% since being tipped, and while this is a growth market, it is now fully valued, trading on a March 2008 p/e of nearly 18.

Update: TAKE PROFITS at 83p

British Energy (BGY), the UK's largest power producer, has been chosen as preferred bidder for the electricity trading arm of British Nuclear Group, which is being broken up and privatised.

Update: HOLD at 593p

Advanced Medical Solutions (AIM: AMS), a wound care specialist, saw shares hit a five-year high of 13.5p, after a positive trading update earlier this month.

Update: HOLD at 13.5p

ArmorGroup (ARG): this security services supplier has just agreed a $2.5m a year security deal with the State of Louisiana.

Update: BUY at 62p

Asterand (ATD), Vindon Healthcare (AIM: VDN), Northbridge Industrial Service (AIM: NBI), TripleArc (TPA), and Asian Citrus (ACHL): All still good value.

Update: BUY

None of these tips are for the faint-hearted, and you should assess your risk tolerance and targeted returns before buying. Not all will be home runs' and some will fall short. But assuming they have been sensibly chosen and are monitored closely, gains from the winners should far outweigh any losses. But do expect the odd sleepless night

For more about Paul Hill's specialist share-tipping service, Precision Guided Investments, click here.