Shares greeted 2013 in fine style. I was pleased to see that some constituents of the no-pain, no-gain portfolio joined in the New Year fun, which reflected the fact that the mighty United States economy did not, after all the posturing, tumble over the so-called fiscal cliff.
In my last column I said that investment experts were generally bullish about prospects. Indeed one eminent commentator suggested that shares could well double in the next ten years. He may be right. But such long-term predictions are, in my view, little more than shots in the dark. Indeed even the ritual of forecasting the stock market display over the next 12 months is often a hazardous and unrewarding exercise.
The stock market, although acute at anticipating events, is not a particularly good barometer of the economic and financial climates. It often swings too far, both up and down. Witness the still unconquered peak hit at the turn of the century when dotcom madness sent realistic souls rushing into shares they would normally avoid like the plague. The ragged retreat from that record level was humiliating and painful.
Still, the 2013 approach has undoubtedly been heroic. Indeed shares, with a few hiccups on the way, have made considerable headway since May and have been in particularly fine form from mid-November. I go along with those who expect the stock market to build on its positive start and enjoy a good year.
However, it is worth pointing out that the US problems have not been solved, merely kicked into the long grass. And the UK, along with many other countries, is still deep in the economic mire. A possible stock-market salvation is likely to be the poor interest rates which have undermined the savings industry. The high street rates look weak and unattractive compared with the yields (and growth prospects) that can still be obtained by investing in some blue-chips.
There are hopes that the junior AIM platform may experience a much better year. Indications that ISAs could include AIM stocks must offer encouragement. AIM has been in the dumps for some time as many investors took the view that with the banking crisis taking its toll its constituents were too speculative, and instead settled for blue-chip investments.
AIM has been around since 1995. It was created, after a couple of unsuccessful attempts, to develop a share platform for small, hopefully up-and-coming companies. I suppose it peaked in 2007 when nearly 1,700 companies enjoyed a listing on the junior market. By the end of last year membership was down to just under 1,100 with takeovers as well as graduations to full listings reducing membership. But significant factors in AIM's decline were companies retiring from the market, claiming that the cost of membership was too demanding, and a string of insolvencies.
Maybe the junior platform is over the worst. Paul Mumford of Cavendish Asset Management says he is "quite positive". But he stresses that such is the nature of the junior market that it is wise not to have too many eggs in one basket.
The portfolio has a large proportion of its membership represented by AIM stocks. One of them, Animalcare, has enjoyed a pleasing start to the year with the shares at 145p. They had been bobbing around the 132p level for some time. Cause of the advance was the group's reintroduction of a painkiller for cats and dogs called Buprecare in ampoule form.
The treatment is an important element of Animalcare's array of drugs. In the summer of 2011, the group's supplier decided to stop manufacturing Buprecare ampoules, leaving a noticeable gap in the veterinary group's coverage. Stockbroker N+1 Singer believes the shares now look good value. Analyst Chris Glasper says after a difficult time the outlook is more positive.
The portfolio is still nursing a loss. It acquired the shares at 171p. I am, of course, disappointed by their performance. But hopes the revived product, plus new lines, will help Animalcare battle what is likely to be a tough selling environment could give the stock some added momentum. Buprecare is unlikely to have an immediate impact but should help lift profits.
- More about:
- Mergers And Acquisitions
- Stock And Equity Market And Stock Exchange