The less-regulated junior market has a reputation for very volatile share prices. While this isn’t completely unjustified, it does give me an opportunity to pick up stock in some great businesses whose values are unfairly depressed.
Here are two of what I believe to be the best AIM stocks to buy right now.
Gear4music
Online musical instrument retailer Gear4music (LSE: G4M) is a company whose value has more than halved in the last year. That seems rather overdone.
Sure, the company’s purple patch may be over now that Covid-19-related lockdowns are a thing of the past. Nevertheless, recent trading doesn’t justify such a huge fall, in my opinion.
Total sales hit £47.2m in the three months to the end of 2021, down from the £52.2m achieved in the previous year. Even so, it’s far better than the £40.3m recorded two years earlier. In other words, Gear4music has been steadily executing its growth strategy if we ignore the anomaly that was 2020.
There are headwinds to consider, of course. The rise in the cost of living may dent demand for discretionary items of the sort G4M specialises in, albeit temporarily. Growth in Europe has also been held back due to “short-term Brexit-related challenges“, it said.
There’s little G4M can do about the former. Nevertheless, the January launch of its new home cinema and hifi equipment site AV.com will give the company access to a whole new market and set of customers.
As far as the latter is concerned, business from the region should recover in the next financial year, supported by new distribution centres in Ireland and Spain. Analysts have taken this on board and now have the stock trading on 13 times forecast FY23 earnings.
I expect another trading update from Gear4music in late April. On balance, I’d be prepared to start buying today.
Bioventix
Another of the best AIM stocks to buy right now, in my opinion, is antibody supplier Bioventix (LSE: BVXP). Having tumbled over 25% in the last 12 months, its shares now trade close to the 52-week low. Again, this strikes me as a potential opportunity to acquire shares in a quality business when it’s (temporarily) out of favour.
Yesterday, the company announced revenue fell 8% to £4.73m in the second half of 2021. Much of the blame lies with the pandemic forcing hospitals to focus on other things other than clinical diagnostics. Pre-tax profit fared slightly better, dropping to £3.56m from £3.72m the year before.
Based on its attitude to dividends, management doesn’t seem fazed. Yesterday, Bioventix announced a first interim payout of 52p per share — up 20% on last year. This doesn’t sound like a company in trouble to me. Indeed, Bioventix continues to look financially sound with £5.1m in cash balances.
Of course, all results announcements are backward-looking. And, yes, there’s nothing to stop the share price from sinking lower if the rotation into value stocks continues.
On a positive note, new products are “moving into commercial development” and will add to revenues in time. The antibody troponin (used to identify heart attacks) also looks set to become a great source of growth moving forward.
All told, I remain bullish on Bioventix over the medium-to-long term. I’d be happy to buy this AIM stock today.