Global stock markets have been volatile in 2022 and small-cap stocks have generally taken the biggest hit. Just look at the UK’s Alternative Investment Market (AIM), which is home to many smaller British companies. This year, a lot of AIM stocks have tanked.
The good news for long-term investors like myself is that the weakness across the AIM has thrown up some very attractive investment opportunities. With that in mind, here’s a look at three stocks I’d buy today.
A top FinTech company
One of my top picks right now is Alpha FX (LSE: FX). It’s a fast-growing, founder-led provider of financial solutions that specialises in FX risk management and mass payments.
A trading update posted last month showed that Alpha FX has plenty of momentum at present. For the six months to 30 June, revenue was up 35% to £46m. Meanwhile, the company grew its client base significantly over the period, increasing its alternative banking accounts by 239%.
After a share price pullback this year, Alpha FX shares are valued attractively, in my view. With analysts expecting earnings per share of 62.2p for 2022, the forward-looking P/E ratio is about 29. I don’t see that as high, given the strong level of growth here.
Of course, if growth slows, the share price could decline given the high valuation. I’m comfortable with this risk however, given Alpha’s track record.
A cybersecurity play
Another AIM stock I’d snap up today is GB Group (LSE: GBG). It’s a leading provider of identity management solutions that serves blue-chip companies globally (HSBC, Volkswagen, and ASOS are just some of its customers).
GB Group shares have plummeted this year and I think the fall is overdone. In the company’s recent full-year results, for the year ended 31 March, it posted record revenue of £242.5m (up 11.4% year-on-year) and adjusted operating profit ahead of original market expectations. And looking ahead, the group said it’s well-placed to successfully achieve its strategic and financial objectives in FY2023 and beyond.
A risk to consider here is that the company could be impacted by the weakening economy. With the stock now trading on a P/E ratio in the low 20s however, I think the risk/reward profile here is attractive.
Video game champion
Finally, I’d also buy Keywords Studios (LSE: KWS). It’s a leading provider of technical services to the video gaming industry. This is another AIM company that has momentum.
Recently, it said it expects to post total revenue growth of around 34% for the six months to 30 June. Adjusted profit before tax is expected to be up around 35% year-on-year. It added that it had seen “robust demand” for all of the group’s services.
“Keywords has started the year very strongly, building on the momentum achieved in 2021,” commented CEO Bertrand Bodson.
It’s worth noting that the growth of the gaming industry could slow down a bit after Covid. This could potentially impact Keywords Studios’ growth. The forward-looking P/E of 32 here doesn’t really leave a margin of safety, so this is a risk to keep in mind.
I’m thinking long term here however, and I reckon this AIM stock should do well as the gaming industry grows over time.