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David Kempton: 5 new stocks for my AIM portfolio

Experienced investor reflects on markets and adjusts portfolio of Alternative Investment Market shares after 34% gain since September.

 
David Kempton: 5 new stocks for my AIM portfolio

I am writing this in New York where president Trump’s surprising sabre rattling is proving popular, although the face-off between the US and North Korea is terrifying.

I’ve been surprised by the support for the new Trump regime both on Wall Street and in industry. They like his accessibility and raw humanity. He attacks problems with a fresh approach, albeit there’s a palpable fear of his unpredictability – you never know quite what policy he will adopt next.

However if you are a car maker, textile manufacturer or banker seeking an audience, he won’t make you wait three months but will see you for an hour tomorrow, accompanied by an expert adviser.

Trump is seen as having a commercial understanding of the issues and an urgent wish to do something effective. Despite all the political gaffes and outrageous policies, Americans seem surprisingly relaxed with the situation, helping to push the US stock market onwards in its eight year bull market.

No golden age

Back in Blighty we have very different issues. On the surface we look to be in a golden period of low inflation, low interest rates, increasing exports with strong global trade helped by China's growth, and a FTSE All Share index that has compounded at 6.2% a year since 1985.

Looking forward, however, the picture is very unsettled. We are more certain to see economic change in the three years leading up to Brexit than we’ve seen in the last 30 with no more quantitative easing or interest rate cuts from the Bank of England to help us.

Irrespective of the recent improving growth rates across Europe, the EU is bust under a mountain of debt – the project is not working and even looks likely to be reconstituted with Britain’s exit possibly a catalyst for change. There is further real uncertainty cast by the unpredictable September German and this Sunday’s French election.

If the anti-business Le Pen or Melenchon are eventually elected at the second stage in May, it would throw European markets into turmoil. Macron should win, though, in which case there’ll be a powerful relief rally as investors snap up euro stocks fast.

In the UK we have no idea of what lies ahead with just seven weeks from our own election. We appear to start from a position of hard Brexit and will negotiate down from there, whilst both sides are mindful that 43% of UK exports go to the EU, whilst 8% of theirs comes to UK – who starts from the stronger position in any negotiation from that standpoint?

In fact, 53% of all UK imports come from the EU – 20% of German cars, actually made in Germany, come to the UK, making us their single biggest world market in volume terms.

We have a long period of uncertainty ahead, but will 10,000 City workers really relocate? Nobody knows but there is a huge reluctance to leave; people like London with its established financial infrastructure, education and entertainment, though sadly there seems a real expectation that banks and financial firms will lose the passport which lets them trade freely across Europe.

With a watchful eye on all this turmoil and the certain significant changes ahead, I continue to invest cautiously.

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8 comments so far. Why not have your say?

Kevin S

Apr 19, 2017 at 19:28

one aspect of AIM shares & IHT is the 2 year rule. If you buy a share & hold for one year & then sell do you have to immediately buy another or if you wait does the 2 year clock start again ?

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Mark Beale

Apr 20, 2017 at 03:48

i understand that if you sell a holding you have 3 years to reinvest the proceeds

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Ian Holmes

Apr 20, 2017 at 05:07

Kevin S:

Mark B is absolutely right, but Mark didn't mention whether the "clock starts ticking" again.

Basically, no. However, any realised gains when you sell, if re-invested in AIM do restart the clock for the gain. So initial investment of £1,000, sold at (say) £1,500 if re-invested will start the clock ticking on the £500 as soon as it is re-invested. The £1,000 can be re-invested at any point in the 3-year period and the clock doesn't re-start on that. Let the 3 year period lapse and you're back to square 1.

Reliefs are available for losses - but it's too protracted to explain here (Check the LSE document for this:

http://www.londonstockexchange.com/companies-and-advisors/aim/publications/a-guide-to-aim-tax-benefits.pdf

Also, beware, not all AIM shares qualify. Here is a couple of articles. one from the Share Centre (not recent but still relevant) and the other from Shares Magazine which should help you understand and research potential investments.

https://www.share.com/blog/2014/may/guide-qualifying-aim-companies-inheritance-tax-planning/

https://www.sharesmagazine.co.uk/article/avoid-inheritance-tax-with-aim-stocks

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mikest

Apr 20, 2017 at 09:20

Whilst the 43% exports to EU seems right, the Economist gave a 16% combined EU imports figure last July. Have EU imports really halved in that time?

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kokko llookko

Apr 22, 2017 at 00:36

http://mayaclix.com/?r=Doffy register and click :)

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Mark Stringer

Apr 23, 2017 at 10:47

I'd like to know how reliable these economic figures are. Are they as reliable as our guesstimated GDP or skewed basket of goods data?

We do know that we import more than we export, that is a given, but The Economist is an EU pr machine with openly self declared anti Brexit and pro EU mandate in its journalism.

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Scout

Apr 27, 2017 at 17:38

I understand that not all AIM stocks qualify for inheritance planning and the two year rule. Does anyone know how to obtain a list of those that do.

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Ian Holmes

Apr 28, 2017 at 03:33

Hi Scout!

I have tried to find one, but my research tells me there is no such list! Additionally, a company's qualification can change whole or in part at any time. This is based on the exceptions (e.g. property providing income which is not wholly associated with the business).

Read the "Businesses that do not qualify" section in my previous comment:

https://www.share.com/blog/2014/may/guide-qualifying-aim-companies-inheritance-tax-planning/

I have been told also to check with the company as they should know. Unfortunately when I have enquired (five occasions) the companies tells me to ask a tax expert!

So I think you can only do your own research. According to the above link, there are potentially 92 companies that do not or only partially qualify.

Investor's Champion at the following website offers a screening service - for a fee. (Scroll to the bottom of the webpage)

http://www.investorschampion.com/aim-for-iht

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