My AIM Investment Picks Part 1.
After a Summer drought for all the wrong reasons, it is starting to look like AIM market liquidity has finally received its own shot in the arm this week. Some stocks are starting to be better appreciated with more potential starting to be factored in again.
With the view that this was potentially coming, I have spent the last few/months weeks (holidays permitting) moving my portfolio around to ensure that I am positioned for any impulsive/recovery moves. I am not generally a shorter-term investor but I do recognise the potential fragility of the market over the coming 12 months and so am prepared to be more flexible and more brutal with my holdings if necessary.
With that in mind my key 2021/2022 picks right now are as follows ;
In adjusting my picks I have wanted to focus as much as possible on companies that have solid cash runways. The market may well be showing signs of life but that doesn't mean the sense of pending doom has been completely removed. So for me better to enter/hold stocks that have their raises in the bank and can be assessed with them in mind.
Additionally, whatever happens in the wider market solid pharma and green transition plays in my view stand the best chance of withstanding or recovering under such circumstances. Especially when they are cashed up to deliver several key milestones.
The likes of #GILD may need cash sooner rather than later but the exciting potential in this little Esports company at the moment far outweighs that cost and so I am happy to ride that out. I also don't see Esports gaming market growth being seriously upended by any downturn so it's a stayer for me.
Some picks like #SRB, #YU and potentially #AVCT shouldn't have to return to the market again unless it is for taking it to the next level type growth items which I am never against raising for if it is the right move and brings more value than it takes. Not all dilution is bad dilution after all.
#ATM raised £13m (before expenses) back in May which gives them the ability to deliver their phase 1 expansion to c. 1,260t tin + potential by-products. From an investment point of view, I don't need the by-products to come in so long as they hit their tin output. That's because it should put them on a self-sustaining foothold through to the main phase 2 raise and allow the much larger studies on that proposed x8 output increase to be completed.
This will then inevitably add further value to the investment if the studies are indeed favourable. ATM operates on large artisan mined areas which in my view helps lower the risk on the resource side of things. They also have 3 Mining Rights covering 3 separate areas of potential mining. So from a regulatory and I believe resource point of view, they are really well-positioned to deliver a phase 2 ready business.
I also don't need them to maintain the current c. $33,000 tin prices for my investment to grow but I will readily take them for as long as I can get them. Instead, I choose to keep anything above the medium-term projected price of c. $23,000 as a bonus. With fully allocated cash costs of $16,200 per ton tin contained in concentrate and c. 65% recoveries that is still a really healthy position for a small miner on a big expansion path.
That said the potential is there for prices to remain elevated and for by-products to be added to the above ATM tin revenues. ATM management states that these by-products have the ability to more than double revenues which therefore presents me with two sizeable upside catalysts. Add in additional resource upgrades which are also planned to coming through from Q3 onwards (and running for the next 12 months) and I have multiple avenues for growth. All captured by that May raise. Hence why I like ATM very much.
In terms of 4D Pharma, this is a company that I have held a small position in for some time now that became super attractive once it secured its funding until Q4 2022 (See 29th July 2021 RNS) and then hit that 80p valuation level on the chart.
By that point just about all the goodwill had been sucked out of it but without good reason. This was then doubled down upon by the fact that #DDDD management signalled updates were on the horizon through their two presentations at ESMO 2021 in Sept. That's then the point where timelines become finite and renewed interest is bound to come. Couple it with a chart that is demonstrating a potential point of strong reversal and for me it was time to load up.
Several well respected Twitter contributors have already demonstrated the upcoming news flow for #DDDD but here it is once again.
What I like about coming at this with renewed energy is that the presentation is bang up to date. So milestones are current. I also like the fact that they have multiple opportunities that aren't just about MRx0518. That spreads my risk be it that risk is certainly still apparent for such early-stage pharma plays such as this.
At the very least the majority of these are captured by the recent cash raise and cash runway through to Q4 2022. However, as I discussed yesterday on my Twitter feed I can see further cash being required before this but through Oxford Finance there is a set-up where potentially that runway can be extended well into 2023. That's because I see the further milestone payments being attached to the currently active programme and not for future opportunities.
That brings added emphasis to the results expected before YE but also creates an even greater opportunity for me as an investor.
However, more detail on this deal would certainly be welcomed because on paper it looks like such a good deal for an early stage bio-pharma (interest-only payments until Sept 2023 and to date 'just' 212,568 shares granted at c. 84p).
Even since I began producing these opening notes yesterday both ATM and DDDD have started to move northwards. Of the two ATM is the safer hold for me but #DDDD in my view has the most pent up energy in it because of the lengthy 6-month downward trajectory but that is my feeling and not to be trusted as anything else but that.
In future blogs, I plan to expand on these and my other picks and give reasons as to why I have chosen to buy in, stay or go. I trust it will be of worth to some of you out there.
Note - This article represents the opinion and research of the author only and the author currently holds a position in one or more of the stocks mentioned. Nothing shared in this article is to be deemed financial advice. Where possible all facts have been checked and references provided, however, it is the responsibility of the reader to check all details for themselves before making any financial decisions. Please also refer to the disclaimer policy