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City AM’s Wilcox wary of Aim overvaluation

City Asset Management Aim manager David Wilcox is wary of overvaluation within Aim stocks following the recent move to allow them to be held in Isas.

Since 5 August 2013, Aim stocks have been allowed to be held in Isas. Some Aim stocks also qualify for business property relief, making them exempt from inheritance tax if they are held for at least two years. 

FE Analytics shows Aim stocks have risen by 10.7 per cent since 5 August, outpacing the 2.8 per cent gain seen in the FTSE All Share.

Wilcox says: “We could get pockets of overvaluation although we are not seeing this so far. 

“The thing to do is to try and target businesses further down the market cap scale, so below £50m in size. 

“I am not seeing a huge influx of cash into these companies.”

Wilcox adds: “It is a double-edged sword. We do not want to start attracting highly speculative ventures. 

“And if you are running a lot of money in Aim, you have to be cautious because liquidity is not that great – but it favours smaller managers in this space.”

However, EA Financial Solutions managing director Minesh Patel says: “Aim is an exciting area of the market, especially because of the IHT breaks.

“I would say people should be gradual with their investment and phase it over several months if they are worried about overvaluation. 

“The trouble is, worries about overvaluation can become overinflated and used by investors as an excuse not to invest.”

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