Shares: Tiny acorns ready to grow: Quentin Lumsden looks at barely traded bargain shares

WARBURG Securities' drastic act of ceasing to make markets in the shares of 362 companies highlights the growing risk of shareholders finding themselves locked into investments.

Even such widely held companies as Sketchley, with an army of small shareholders attracted by the perk of discounts on dry cleaning, has found itself losing a market-maker. This cannot have helped the shares, which have dropped from 160p in early May to 99p.

Companies with only one remaining market-maker face the biggest problems. They need to find another, and quickly, to avoid demotion to the Traded Bulletin Board of the Stock Exchange - a fate likened by some to trading by way of a card in a newsagent's window.

Conversely, investors who find really successful small companies will reap a double benefit as the shares become more marketable. Two which look well placed to do this are Huntleigh Technology, a fast- growing specialist healthcare group I first wrote about last year when the shares were 233p and Acorn Computers, a more speculative selection at 40p.

Huntleigh has already done very well: the shares stand at 625p, the highest rating in the sector, with a historic p/e of over 36. However, interim results due on 23 September are likely to put this stunning rating in perspective. Since 1987, when profits were depressed by problems in the US, Huntleigh has doubled sales to pounds 20.8m and multiplied pre-tax profits to pounds 2.3m from pounds 107,000. Analysts anticipate a further advance to pounds 3m in the current year but even that, a 30 per cent rise, is likely to be well beaten.

The key to its success is booming worldwide demand for the group's proprietary medical products. These include specialised mattresses, available on sale or rental, which help prevent bedsores; intermittent compression devices to ease swelling and allied complications after surgery; and a range of hand-held products which monitor patient and foetal health and blood-flow.

Heavy spending on research and development means there are plenty of new products in the pipeline to maintain strong growth, while the group is also considering a manufacturing facility in the US to exploit the weakness of the dollar.

There is a tight market in Huntleigh's shares, with founder directors and family sitting on a large stake, but they are well worth acquiring for investors who want a share in one of the UK's most exciting growth stories.

Acorn Computer at 40p is barely half Huntleigh's size, with a market capitalisation of under pounds 30m, and will appeal to the investor who likes red- blooded speculative potential. The company boomed and busted in the 1980s through its success in selling personal computers to schools. Eventually it was rescued by Olivetti, which ended up with a 79 per cent stake. The schools market has become almost as competitive as the rest of the computer market and, although Acorn has retained a share of 50 per cent plus, profits virtually disappeared last year and the shares hit a low of 2.5p.

Just when it seemed all was lost, the company has sprung into a frenzy of activity which could transform it. The key is the company's leading position in the next generation of microcomputer technology - Risc, or Reduced Instruction Set Computers, which are faster and cheaper.

Acorn is contracted to supply the electronic chips for Apple's new hand-held range of Newton computers. If those sell well, Acorn will reap potentially enormous royalty income. The group has also announced 14 new products based on its technology, taking it firmly into the consumer and professional markets at prices which will jolt rivals such as Commodore and Amstrad - Dixons has already dropped Atari for Acorn.

There are also rumours of a joint venture with Sharp which could take Acorn chips into Japanese equipment.

Not even the group's stockbroker is ready to put any numbers to this potential, very little of which will be reflected in October's interim figures. But Acorn really could be a mighty oak in the making.

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