Three small Aim stocks with big tax-free potential

A professional investor tells us where he’d put his money. This week: Jonathan Moyes of high net-worth investment service Wealth Club picks three of his top Aim stocks

In August 2013 a rule change enabled investors to hold shares listed on Aim, the London Stock Exchange’s market for smaller, fast-growing companies, in their Individual Savings Accounts (Isas) for the first time. Since many Aim stocks also qualify for inheritance tax (IHT) relief, the new rule gave investors the opportunity to construct an IHT-free Aim Isa.

Building an Aim portfolio is not for everyone. Aside from having to monitor your investments, you also need to ensure they continue to qualify for IHT relief and keep meticulous records of when you bought them. A popular no-hassle solution is to choose a ready-made, professionally managed Aim Isa. We like those run by Octopus, Blankstone Sington and Puma. But some investors will be inclined to do their own research and stock-picking. Here are three of our favourites to consider.

Opening the door to recovery 

Epwin Group (Aim: EPWN) is one of the UK’s largest manufacturers of PVC windows, doors and roof systems, selling mainly to the UK construction industry. Like similar companies, it has suffered from the economic slowdown and the deterioration in investors’ sentiment over the last three years, which has affected its valuation. Now, however, with the general election out of the way and the direction of travel on Brexit established, Epwin’s prospects should brighten. A recovery in both consumer and corporate spending could push its valuation and earnings higher. In the meantime, the company generates decent returns on capital (a key gauge of profitability) and is cash flow-generative. Further points in its favour are low debt and an attractive 5% dividend. 

Aim’s first law firm 

Gateley Holdings (Aim: GTLY) was the first commercial law firm to list on the market in 2015. Since then, performance has been strong, with revenue growing by 14% a year and topping £100m for the first time in 2019. The group is now the UK’s most active corporate legal adviser, acting for all ten of the UK’s largest housebuilders and five of the six largest banks. Partners hold more than 50% of the shares and the business is run conservatively, focusing on the long-term with a strong balance sheet and free cash generation. The shares currently yield over 4%, but there’s also potential for long-term capital growth. 

Engineering profits since 1786 

Renew Holdings (Aim: RNWH) is a Leeds-based essential engineering-services company focused on the energy, environment and infrastructure markets. The company has a colourful history going back to 1786 and it listed on Aim in 2001. The company has more than doubled its profits over the last five years through organic growth and acquisitions of complementary businesses. It recently announced a strong set of results, including a 23% increase in operating profit to £38.3m for the year to September 2019, on revenues of £600.6m, and a 15% rise in the dividend to 11.5p a share, the eighth consecutive year of increases in the dividend. With a market cap of £395m and only £10m of net debt on the balance sheet, this is an attractively valued business given its growth profile. 

Recommended

The best 0% balance-transfer credit cards
Credit cards

The best 0% balance-transfer credit cards

These 0% balance transfer credit cards offer some of the best deals on the market today.
26 May 2023
Where do we go from here?
Investments

Where do we go from here?

A new series of interviews from MoneyWeek
26 May 2023
Best savings accounts – May 2023
Savings

Best savings accounts – May 2023

Interest rates have been creeping up - we look at the best savings accounts on the market right now.
26 May 2023
The best one-year fixed savings accounts - May 2023
Savings

The best one-year fixed savings accounts - May 2023

You can now earn 5% on 1 year fixed savings accounts - the best rate seen in 14 years. We have all the latest rates available now.
26 May 2023

Most Popular

Nationwide to give £100 cash boost to customers
Personal finance

Nationwide to give £100 cash boost to customers

Nationwide Building Society is giving customers £100 as it reinvests profits. Dubbed the Nationwide Fairer Share scheme, we look at who is eligible.
22 May 2023
Share tips of the week – 26 May
Investments

Share tips of the week – 26 May

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
25 May 2023
Holiday rip-off: Millions of travellers hit with hidden costs by using debit card abroad
Personal finance

Holiday rip-off: Millions of travellers hit with hidden costs by using debit card abroad

A family of four on a week-long trip to France could pay an extra £212 in fees by using their everyday bank card compared to the lowest-cost option, a…
23 May 2023