A word of warning – AIM is more lightly regulated than the main market and also contains some high-risk speculative stocks. Careful research is needed to find the hidden gems, but I’ve found it’s worth the effort. Here are seven AIM market stocks that I’d consider buying for my portfolio today.

Safer profits from property

My first choice is AIM property developer Watkin Jones (LSE: WJG). This company specialises in building student accommodation and apartment blocks, which it then sells to big rental landlords. New buildings are often pre-sold before they’re built, so the risk of losing money on completed projects is low.

The main fear I have is that this business could face much tougher competition in the future. Purpose-built rental accommodation is a growing market with some big money behind it. But Watkin Jones is an established player with a good reputation. I think it should continue to do well.

The shares have slumped recently, and this stock now offers one of the higher dividend yields on the AIM market, at around 3.9%. I think Watkin Jones looks good value at current levels.

A potential bargain

My second pick is tableware and home fragrance group Portmeirion (LSE: PMP). This business grew out of a gift shop in North Wales, but today owns brands including Spode, Royal Worcester and Wax Lyrical.

One potential concern for me is that if it continues to buy up other businesses, Portmeirion could lose focus on its core pottery business. This still generates the majority of profits.

However, Portmeirion’s latest results suggest to me that this isn’t a problem yet. The group’s 2021 profits were only slightly below 2019 levels and City analysts expect profits to hit record highs this year.

The shares currently trade on just eight times earnings and offer a 4% dividend yield. I’m tempted to buy at current levels.

Promising newcomer

Franchise Brands (LSE: FRAN) only floated on AIM in 2016 but is growing fast and looks promising to me. This group owns a range of franchised businesses, including drain specialist Metro Rod.

Management recent expanded into the US with the acquisition of Filta, which provides commercial kitchen maintenance services through a franchise network in the UK and US.

Franchise Brands’ shares aren’t cheap, on 21 times 2022 forecast earnings. If growth slows, then the shares could fall sharply. But progress so far has been good, in my view.

Annual profit has risen from under £2m in 2017 to more than £5m last year. Franchise Brands is one AIM growth stock I’d consider buying for my portfolio.

Nuclear specialist

I normally avoid buying shares in building contractors. But I think that Renew Holdings is a bit different. This business specialises in essential infrastructure such as rail, water and nuclear energy.

Most of these areas are heavily regulated. Unlike housing and commercial property, they do not usually suffer from cyclical booms and busts. I’m particularly interested in the exposure to nuclear energy, which I think could be a growth area as the UK moves away from coal and gas.

Renew has delivered steady growth in recent years, with profits rising from £12m in 2017 to more than £30m last year. So far, management has been able to manage material shortages and rising costs without any impact on trading, we’re told.

If these problems continue, I think it might become more difficult for the company to manage them. That could cause profits to fall below expectations.

However, I’d see this as a short-term issue that would affect many competitors equally, so I’m not too worried. For now, I think Renew Holdings looks an interesting opportunity for continued growth.

A cash-backed 6% yield

Bank note authentication and brand protection specialist Spectra Systems has one of the highest dividend yields on AIM, at 6.4%.

This tempting payout looks fairly safe, in my view. Spectra has no debt and generates plenty of cash each year, thanks to its 35% operating profit margin. I think the main reason these shares don’t trade much higher is that the company’s growth rate has been fairly slow in recent years.

Investors worry that demand for bank notes and Spectra’s services could fall in future years. But there’s no sign of that this year and I think new products such as a machine-readable plastic banknote material could support long-term demand.

This is a niche business, but as an income investor I’m tempted to add a few to my portfolio.

Pharma growth

Healthcare is one of the long-term growth themes in my portfolio. One less well-known company in this sector is Alliance Pharma (LSE: APH).

Alliance specialises in buying mature consumer healthcare products and improving their distribution and marketing. The firm’s share price has doubled over the last five years.

This business may not sound that exciting, but profit margins have averaged over 20% since 2016 and sales have nearly doubled over this period.

I think management is a key risk here – misjudged future acquisitions could hit profits and damage the group’s growth record.

For now, though, I remain bullish about this company. I’d be happy to tuck a few shares away for the next five years.

25% growth forecast at this stock

My final pick is currency exchange specialist Argentex (LSE: AGFX). This small-cap specialises in providing foreign exchange services to corporate and private clients.

The business is led by founder and CEO Harry Adams, who has a 12% shareholding in the business. I reckon this should mean his interests are well-aligned with those of shareholders.

Perhaps the biggest risk I can see is that this is a fast-growing, competitive market. Will Argentex end up as a long-term winner or an also-ran?

I don’t know, but broker forecasts suggest it could report 25% earnings growth this year. Based on these estimates, I think the shares look very cheap on eight times forecast earnings. This AIM stock is on my list as a potential buy.

A top pharma stock

Our need for essential pharmaceutical products and consumer healthcare goods remains largely unchanged at all points of the economic cycle. This is what makes Alliance Pharma (LSE: APH) a great cheap UK share for me to buy if stock markets crash. The company makes products such as Kelo-Cote scar treatment gel, Vamousse lice treatment, and Nu-Seals blood clot prevention tablets, which it sells worldwide.

Alliance Pharma also specialises in acquiring products that have strong brand power and a leading position in the areas in which they trade. This provides an extra layer of protection.

However, I am keeping in mind that an M&A-led growth strategy like this can throw up a world of problems, from disappointing revenues to the buyer being forced to overpay for an asset amid a scarcity of other acquisition opportunities.

A premier UK share to buy

We also need to keep ourselves fed, even during the onset of economic, social, and political crises. This is why I’m thinking of snapping up Premier Foods (LSE: PFD). This food manufacturer makes cakes, custards, cooking sauces and gravies among ranges of other edible products. And its labels such as Mr Kipling, Oxo, and Homepride are ones that shoppers will stretch their shopping budgets to buy.

The food manufacturing industry is packed with competition, of course. And Premier Foods isn’t immune to pressure from other heavyweight brands, or generic supermarket labels. I get confidence from company data showing that its products can be found in 96% of British homes.

I’d also buy Premier Foods despite the threat of rising cost inflation. I think it should be able to effectively pass higher input costs on to its customers.

An unloved nearly-penny stock to buy

The personal goods sector is another which tends to perform robustly when economic conditions worsen. This is why I’m thinking of buying Revolution Beauty Group (LSE: REVB) today. Indeed, I’d buy it following its recent drop to record lows. Revolution’s share price has dipped 23% since its IPO in July.

I believe this almost-penny stock has a bright future as consumers become more conscientious about the environmental impact of their products.

Revolution Beauty is PETA-certified beauty product producer — none of its cosmetics (or product ingredients) are tested on animals. It is also taking steps to aggressively reduce the amount of plastic it uses, while it is bulking up its range of vegan products to latch onto this fast-growing segment.

Of course, the beauty market is highly competitive and Revolution will have to push mighty hard to make an impact. But as a long-term investor, I like its strong green credentials, and think they could deliver great shareholder returns in the years ahead.

Box clever

Food retailer Parsley Box Group (LSE: MEAL) hasn’t had an easy ride since its IPO back in April. In fact it’s halved in value from its launch price as investor confidence has eroded. It was last trading just above penny stock territory at 101p per share.

Parsley Box’s share price reached a new low following interims released last week. Though the retailer saw revenues leap 26% higher in the six months to June, to £1.4m, soaring costs caused pre-tax losses to rocket 432% year-on-year to £5.4m. There’s a danger that costs could remain elevated, too, if Covid-19 cases continue to harm the supply chain and Brexit-related trade disruptions persist.

That said, I think Parsley Box could be an attractive buy for long-term investors. This is because its products and services are aimed at the over-60s, a demographic that’s growing fast and which is one of the more affluent age categories. There are said to be more than 12m people aged 65 and over today,  according to the Office for National Statistics. This is a figure that’s set to keep surging and which will top 20m within the next 50 years.

And so far this cheap UK share seems to be making a splash here, the number of active customers rising 77% in the first half. With a healthy balance sheet Parsley Box has the means to keep growing its customer base through fresh marketing campaigns and further product innovation, too.

A cheap UK share in good health

Snapping up Alliance Pharma (LSE: APH) shares is another good idea, in my opinion. In fact, trading at this cheap UK share has been particularly strong of late and turnover bounced 24% in the six months to June. I’d buy it before its half-year results announcement is released on Tuesday, 21 September.

Alliance Pharma’s consumer healthcare portfolio is packed with market-leading global brands like its Kelo-Cote scar treatment, Nizoral anti-dandruff shampoo, and Amberen menopause product. The tremendous brand power of these must-have healthcare products allows the company to grow profits during both strong and weak economic periods.

That said, Alliance Pharma endured a rare profits decline in 2020 as Covid-19 closed retail outlets, making it harder for customers to get its products. Delays to routine treatments caused further problems as demand for the healthcare play’s prescription products also dropped. It’s important to remember, then, that further bottom-line trouble could be around the corner as coronavirus cases rise.

All that being said, I still think this cheap UK share’s a top buy for me as a long-term investor. In particular I’m excited by Alliance Pharma’s ambitious acquisition-led growth strategy, one that’s given annual earnings growth a significant boost in years gone by, and which the company has the balance sheet strength to continue pursuing. 

I buy stocks for the long term, though. And so the prospect of temporary share price choppiness doesn’t put me off from buying low-cost shares. Here are a couple of top nearly penny stocks I think could soar in value in the years ahead.

The right medicine

The Alliance Pharma (LSE: APH) has risen an impressive 50% during the past 12 months. And in recent sessions this former penny stock has barged to record highs above £1. I reckon the business could gain further traction too when half-year results are unveiled on Tuesday, 21 September.

Alliance Pharma owns the marketing rights to scores of heavyweight brands in the fields of consumer healthcare and prescription medicine. These products, like Kelo-Cote scar treatment, Nizoral dandruff shampoo, and (following recent acquisition action) menopause reliever Amberen, sell in huge quantities in more than 100 countries. Indeed, latest financials showed like-for-like sales of its health products up 8% in the six months to June.

Its successful M&A-led growth strategy has helped Alliance Pharma’s earnings rise 33% over the past five years. So I’m encouraged that the stock has plenty of appetite and financial clout to keep going. But acquisitions are risky business and past form is not always a reliable guide to future performance. Revenues from acquisitions can disappoint and costs can swell, taking a big bite out of profits.

A dirt-cheap penny stock I’d buy today

It’s clear that housebuilding activity in the UK needs to ratchet up several gears over the next decade. And this bodes well for manufacturers of building products like Michelmersh Brick Holdings (LSE: MBH). I’ve already bought brickmaker Ibstock for my Stocks and Shares ISA for the very same reason.

I’d buy this nearly penny stock before it releases half-year results on Tuesday, 7 September. Most recent financials in June revealed “strong demand” for its products amid a “very active” construction sector. Many major housebuilders are ramping up production as favourable lending conditions supercharge demand for first-time buyers. So I expect trading at Michelmersh to remain quite robust for some time to come, a theme I don’t think is reflected at current prices. Today the low-cost share trades around 136p, resulting in a forward price-to-earnings growth (PEG) ratio of just 0.5.

I think Michelmersh is a top buy despite the impact that an economic downturn could have on its top line. The UK economy has bounced back strongly following 2020’s Covid-19-related washout. But the rebound could prove temporary and home sales could falter if the Delta variant continues spreading aggressively.

A gaming great

The staggering rate at which the video games market is growing offers plenty of UK shares to get excited about. I myself have invested in development services provider Keywords Studios to ride this theme. And I’d happily buy software developer Frontier Developments (LSE: FDEV) to make money from this phenomenon.

There’s no guarantee that a game title will be a success. Technical problems and a poor critical reception can prove a disaster for games developers like these. But Frontier has a decent track record on this front and Jurassic World Evolution for example — the sequel of which is set for later this year — sold a staggering 2m copies in the seven months following its release a couple of years back.

Analysts at Accenture say that the global video games market is worth a whopping $300bn. This is bigger than the music and movie industries combined. And they think there will be 3.1m gamers by 2023, a 400m rise from today’s levels. Frontier Developments could have a massive role to play in this fast-growing industry. And I think its low forward price-to-earnings growth (PEG) ratio of 0.7 makes it one of the best value stocks for me to buy today.

One of the best UK pharma stocks?

Buying UK pharmaceutical shares could also prove a wise strategy for me as global investment in healthcare grows. There are several British stocks I can buy to ride this strategy, perhaps most notably either AstraZeneca or GlaxoSmithKline. But I think a better way to play this theme could be to invest in Alliance Pharma (LSE: APH).

This is because drugs development is notoriously problematic. And even those two FTSE 100 giants I mentioned above are no strangers to disappointment at the lab bench. Such troubles can result in huge unexpected costs and a great big hole in the revenues column if they fail to launch on time (if at all). This is where Alliance Pharma could prove to be a better buy. The drugs that this pharmaceuticals stock acquires have already gone through the initial testing phase.

That’s not to say that this UK healthcare stock is totally without risk, of course. The products it chooses to snap up could come under scrutiny further down the line. And its acquisition-led model leaves it in danger of overpaying for a drug that may fail to deliver anticipated results.

However, Alliance Pharma has a packed portfolio of labels like revenues drivers Kelo-Cote and Nizoral, products that have underpinned splendid sales growth for years. This UK share doesn’t come cheap — it trades on a forward price-to-earnings (P/E) ratio of 19 times. But I think it could prove worthy of its slightly heavy paper valuation.

Alliance states its expertise is in the marketing and regulatory management of its products. The company’s products fit into two groups, consumer healthcare and prescription medicines, but are predominantly gained through acquisitions rather than in-house research and development.

Managing a portfolio of brands with expertise has delivered success. Alliance more than doubled its sales between 2015 and 2019. The Alliance share price was 33p at the start of 2015 but finished 2019 at 87p.

Obviously, 2020 was a tricky year for any company, but how did Alliance fare?

Coronavirus impact

The pandemic brought mixed fortunes for Alliance. On the one hand, its consumer healthcare division reported revenues of £85.3m for 2020, bettering the £83.7m of sales recorded in 2019. On the other, prescription medicine revenues slipped from £51.9m to £44.5m for 2020 due to routine medical appointments being delayed and cancelled during the pandemic.

Profits before tax slipped 58% from 2019 to 2020. However, a good chunk of that resulted from acquisition costs and non-cash impairment and amortisation charges — more on that latter. Alliance paid its shareholders a total of 1.61p per share in dividends in 2020, compared to 0.54p in 2019.

Expectations for 2021 are positive. Management reports 2021 has started well and sees a further rebound in sales for the year. This, together with the recent acquisition of Biogix, and its flagship Amberen brand, should help drive revenues back above 2019 levels.

Would I buy this penny share?

So could this penny share become a pound one in 2021? Possibly. The Alliance share price has been over £1 before. That was back in the summer of 2018. Interim results for that year, published in September, crashed the share price back down to 66p. Investors did not like the reorganisation of Chinese operations, which included a £2.5m write-down of a business line and a 35% slump in earnings per share for the period.

But assuming the world does get back to at least near normality in 2021, a positive half-yearly report might be enough to turn Alliance from a penny to a pound share. Although its price-to-earnings (P/E) ratio looks pricey at 65, I can see that Alliance does offer higher average revenue growth and higher margins than other personal care companies, as shown in the table below.

Source: FT equity market screener

But, growth is boosted by acquisitions, which can result in later write-downs. Alliance has decided to write off prescription medicine and other brands assets over 20 years. If they were all going off-patent within 20 years, that would make sense, but I see no mention of patents in the annual report. Without a patent, I am not convinced of the value of a brand of a prescription drug.

At the moment, I am neutral on Alliance. I need to do more digging and I will watch this penny share from the sidelines for the time being. 

Having said that, this area of the stock market can throw up some very lucrative investment opportunities. So, it shouldn’t be ignored completely, in my view.

Here, I’m going to highlight two UK penny stocks I believe are worth a closer look right now. Both companies are profitable and appear to have decent long-term growth prospects.

Strong growth track record

One penny stock I believe looks interesting at the moment is Alliance Pharma (LSE: APH). It’s a UK healthcare company that owns the marketing rights to around 80 consumer healthcare brands and prescription medicines. Some of its key brands include Kelo-Cote, Nizoral, and Amberen.

What stands out to me about Alliance Pharma is that the company had a good long-term growth track record. Over the last five years, revenue has increased by around 170%. Revenue did take a small dip last year (which isn’t surprising given the environment). However, it’s expected to bounce back this year. For FY2021, City analysts expect top-line growth of 28%.

I also like the fact the company is profitable and pays a dividend. Quite often, penny stocks don’t. For FY2020, the company declared a full-year dividend payout of 1.61p. That’s about 46% higher than the one declared five years ago. At the current share price, the yield is about 1.7%.

There are plenty of risks to the investment case here, of course. A poor acquisition could set the company back significantly. Currency risk is also worth mentioning as the group generates substantial sales abroad.

However, the company appears to be confident about the future, stating recently that it looks forward to “regaining the strong momentum and revenue growth that the group has enjoyed in recent years.” So, I think it could be worth a closer look right now.

This penny stock just declared its first dividend

Another UK penny stock I believe is worth highlighting right now is EKF Diagnostics (LSE: EKF). It’s a leading global medical manufacturer that specialises in point-of-care and central lab devices. Its products are used in hospital and research laboratories, doctor’s offices and blood banks in more than 100 countries. EKF also manufactures and distributes products related to Covid-19.

EKF recently posted a very strong set of 2020 results that were boosted by its Covid-19-related activities. For the year, revenue was up 45% to £65.3m while profit before tax was up 180% to £15.4m.

As a result of this strong performance, the company declared a maiden dividend of 1p per share. The company also said it’s confident trading for the year ending 31 December will be “significantly ahead” of already-upgraded management expectations.

I don’t expect the company to keep growing at this prolific rate forever. Post Covid-19, sales and earnings growth are likely to normalise. It’s worth noting that if future growth is disappointing, the share price could fall as the stock has enjoyed a strong run over the last year.

Right now however, the company appears to have a lot of momentum. And after declaring its first dividend, I think it could be worth considering as part of a diversified portfolio.

As we here at The Motley Fool have explained: “If an equity’s share price sits under £1, it can be deemed a penny share”. And like any UK share, these companies can enjoy significant price gains over the long term. However, their cheapness also means that they can be prone to significant price volatility.

2 cheap penny stocks on my radar

That said, here are two British penny stocks I think could help ISA investors like me make big profits in the coming years:

#1: Bakkavor Group

At 98p per share, UK food producing firm Bakkavor Group (LSE: BAKK) falls just inside penny stock territory. I’d buy this British stock because the long-term outlook for the ‘food to go’ (or FTG) sector remains extremely bright.

Covid-19 lockdowns caused sales in this food segment to fall sharply in 2020 following a decade of strong growth. But analysts at Lumina Intelligence think that demand will bounce back strongly as the world comes out of hibernation. They think the British FTG market will be worth £22.3bn by 2023, up more than a billion pounds from 2019 levels.

Bear in mind that the rise of homeworking could hamper long-term FTG growth rates. A sharp uptick in unemployment could derail food-on-the-move demand too, and profits growth at Bakkavor in turn. But there’s plenty more that I like about this penny stock. Along with its commanding position in the soaring FTG market (Bakkavor supplies the top four food retailers in the country) the company is also accelerating its drive into the huge US and Chinese marketplaces.

On top of this, I think Bakkavor looks like a mighty attractive buy at current prices. City analysts think annual earnings will rise 15% in 2021 and by another 11% in 2022. Consequently the company trades on a forward price-to-earnings growth (PEG) ratio of 0.8. It sports enormous dividend yields of 5% and 5.6% for 2021 and 2022 respectively.

#2: Alliance Pharma

Alliance Pharma (LSE: APH) is another cheap UK penny stock I think deserves a close look right now. At current prices of 82p per share, the company trades on a forward PEG ratio of 0.9, also below the benchmark of 1 that can suggest a share is undervalued. City brokers think earnings here will rise 16% in 2021 and 12% next year.

I like Alliance Pharma because the outlook for global healthcare investment is extremely encouraging. And this particular UK share doesn’t carry as much risk as other drug manufacturers, as it acquires and sells products that have already passed the unpredictable initial development stage and been on the market for some time. Remember, though, that problems with its products can always be recognised further down the line. And this can have repercussions on the bottom line if regulators decide to pull their approval for the sale of its drugs.

Christopher Ruane: S4 Capital

I already own S4 Capital (LSE: SFOR) and picked up some more shares in December when it was close to record high prices.

Why would I do that? Doesn’t investment theory talk more positively about averaging a cost down than buying in near the top? The reason is I think the company has great momentum. It is only now being properly appreciated for what it is. S4 Capital is not just a holding company with a vision; it is a fast-growing digital ad platform with an impressive client roster. Its aggressive client acquisition plan and proven capabilities mean both revenue and profits are set to grow strongly.

Its steep price rise this year might suggest it is ready for a breather. But it is an energetically growing business, so I expect further price appreciation. I expect it to start 2021 with continued strong momentum.

Christopher Ruane owns shares in S4 Capital.

Rupert Hargreaves: ITV

Shares in ITV (LSE: ITV) have been on a roller coaster ride this year. At the end of March, the stock plunged as investors became concerned about the impact the pandemic would have on the broadcaster. 

However, shares in the business have recently started to rebound following encouraging signs the advertising market is beginning to recover. I reckon this improvement will continue into 2021, which should help power the stock’s run higher. 

Still, despite this development, management has not, as of yet, set a date for the resumption of the group’s dividend. Hopefully, that’ll change in the first half of 2021. That could be yet another catalyst, which is why it’s my top British stock for January. 

Rupert Hargreaves owns shares in ITV.

Royston Wild: Safestore Holdings

Self-storage demand in Britain continues to grow at an awesome pace. The likes of Safestore Holdings (LSE: SAFE) endured some trading difficulties during the coronavirus crisis. But strong revenues growth outside of Covid-19 lockdown periods illustrate the health of the underlying market. It’s a phenomenon which make UK shares like this such brilliant investments.

Safestore saw group turnover rise 5.4% in the three months to October, it said in its most recent update. It described occupancy for the full fiscal year as “strong” too. I’m eager to see what the self-storage giant’s next trading update on Thursday, January 14 will reveal.

City analysts reckon annual earnings here will rise 5% in fiscal 2021. There’s a strong chance that estimates could receive significant upgrades as the months roll on, in my opinion. And so I think it’s a very attractive buy irrespective of its chunky forward P/E ratio of 24 times.

Royston Wild does not own shares in Safestore Holdings.

Jonathan Smith: Auto Trader Group

The Auto Trader Group (LSE:AUTO) share price is almost back to where it started 2020. Recent half-year results release last month showed a strong demand for cars, with the business noting it to be 20% above the same levels from the prior year. It expressed that from July onwards (when lockdown restrictions were eased), operating profit was in line with previous years. Therefore, if we get a successful vaccine rollout over the coming six months, I think profitability for 2021 could beat expectations.

Jonathan Smith has no position in Auto Trader Group.

Tom Rodgers: IG Group

I’m betting on betting being supremely popular in the first month of the New Year, with Brexit, Covid-19 and ongoing dissent over the US election results all providing huge volatility for traders to exploit. That’s why I’d buy IG Group (LSE:IGG), the highly profitable UK stock, currency and commodities trading company.

Half-year 2020 revenues surged higher, as reported in December, up 66% to £416m, so we know volatile markets create cash for IG Group. A forward P/E of 14 is undemanding on these numbers and I’m especially swayed by a whopping 5.1% dividend yield, making IG Group my top British stock for January.

Tom Rodgers has no current position in IG Group.

Zaven Boyrazian: Oxford Biomedica

AstraZeneca’s Covid-19 vaccine is expected to be authorised before the end of the year. As the vaccine doesn’t require refrigeration of -70°C, storage and transportation are significantly cheaper. Therefore, it’s likely to be the most widely used vaccine once approved.

However, the real winner from this breakthrough is actually Oxford Biomedica (LSE:OXB). The biotech firm is heavily involved in the vaccine’s development & manufacture. It is set to earn £35m by the end of 2021, which is almost half of the total revenue for 2019!

With many other drugs in the pipeline, I think Oxford Biomedica is set to continue thriving for many years to come.

Zaven Boyrazian owns shares in Oxford Biomedica.

Kirsteen Mackay: Mondi 

I think Mondi (LSE:MNDI) will continue to do well in January. The packaging group has seen its share price rise by around 50% since the March market crash. Mondi’s price to earnings ratio is 12, earnings per share are £1.51 and its dividend yield is around 3%. It’s still a relatively cheap stock. Packaging demand is rising with the increase in ecommerce.

Mondi’s doing all the right things to meet ESG targets and received the prestigious recognition as being only one of 10 companies to achieve a triple A rating from the CDP.  

Kirsteen Mackay does not own shares in Mondi.

Roland Head: Centamin

FTSE 250 gold miner Centamin (LSE: CEY) hit a stumbling block last year when it ran into technical problems. The shares fell by up to 50%.

However, I’ve followed this business for a number of years and think this sell off may have gone too far. With the gold price at current levels, I expect Centamin to generate high profit margins and plenty of surplus cash next year, despite plans to increase spending.

I think Centamin is starting to look cheap. New dividend guidance indicates a yield of 5%. If the firm can deliver on its revised mining plan, I think it could be a top British stock to buy in January ahead of hopefully great performance in 2021.

Roland Head does not own any share mentioned.

Kevin Godbold: Smith & Nephew

FTSE 100 medical devices company Smith & Nephew (LSE: SN) suffered through the lockdowns because hospitals stopped doing many of their normal medical procedures. So, demand for the firm’s joint repair and other products plummeted. But with the arrival of Covid-19 vaccines, there’s a road back to normal services for hospitals. And already they are returning to their regular workloads. Smith & Nephew is seeing demand begin to ramp up again. Meanwhile, the stock market looks ahead. And City analysts expect earnings to increase by more than 50% next year. January may see the improving outlook move the share price.

Kevin Godbold does not own shares in Smith & Nephew.

Edward Sheldon: Unilever

My top share for January is consumer goods champion Unilever (LSE: ULVR). Its share price has pulled back recently on the back of sterling strength and I think this is an attractive entry point.

Unilever has made some interesting moves recently. In November, it announced that it had signed an agreement to acquire SmartyPants Vitamins, a US-based vitamin, mineral and supplement company. Then, in December, the company launched a line of pet care products in Brazil, which is projected to have over 100 million cats and dogs by 2030. These moves strike me as shrewd. Both vitamins and pet care are high-growth industries.  

All in all, I see a lot to like about Unilever as we start 2021.

Edward Sheldon owns shares in Unilever.

Paul Summers: On the Beach

Holiday operator On the Beach (LSE: OTB) is my top British stock for January.

While hurdles remain, the gradual distribution of coronavirus vaccines should allow the travel industry to begin recovering this year. Thanks to its flexible business model, lack of significant fixed costs and net cash, I think On the Beach is best placed to capitalise on this. Many families will surely prioritise a week or two in the sun in 2021 over buying the latest tech gadget.

Add in the fact that January tends to see small-caps outperform larger peers and I think On the Beach is a great contrarian play for UK investors. 

Paul Summers has no position in On the Beach

G A Chester: Alliance Pharma 

Alliance Pharma (LSE: APH) owns global top five scar treatment brand Kelo-cote, and around 80 other consumer healthcare products and prescription medicines. Revenue in the latter category has been dented this year by delays to routine treatments due to Covid-19. But I’m expecting a recovery in 2021. 

This should lead to a strong group performance, spearheaded by its fast-growing consumer healthcare brands. Its four ‘star’ products in this category — all acquired in the last five years — now account for over 45% of group revenue, and have significant international growth prospects. With management also actively reviewing further acquisition opportunities, I’m expecting strong investor interest through 2021. 

G A Chester has no position in Alliance Pharma.

Matthew Dumigan: Ashtead Group

After weathering the pandemic relatively well, Ashtead (LSE: AHT) shares have bounced back nicely since the stock market crash last February. Inevitably, earnings took a hit in the first quarter of 2020 as sales dried up, but second-quarter profits came in ahead of forecasts as rental revenue fell less than expected.  

What’s more, I think Ashtead is perfectly positioned to profit from the explosive growth potential of the US equipment rental market, which could gather momentum throughout 2021. Not to mention the benefit that potential fiscal stimulus encouraging building activity could have on the company’s share price. 

Matthew Dumigan does not own shares in Ashtead Group.

Jabran Khan: Clipper Logistics

Clipper Logistics (LSE:CLG) is a fast-growing value-added retail logistics firm that offers a wide range of services including e-fulfilment. Its client base includes M&S and ASOS. 

Due to the pandemic and restrictions, online shopping has soared and Clipper has benefited from this. December’s half-year results showed just how much it has benefitted with a 20% increase in revenue. 

Clipper’s share price is up over 100% in 2020 alone, making it a great candidate to be my top British stock for January. I expect CLG to continue to grow as new contract wins occur and online shopping becomes more prevalent than the traditional high-street shopping experience. 

Jabran Khan has no position in Clipper Logistics.

Harshil Patel: Games Workshop 

Investors in this Nottingham-based fantasy miniatures manufacturer have been on an incredible journey over the past few years. Momentum in the business remains strong, and despite its shares rising by approximately 80% in 2020, it is one of the top UK shares I’d consider adding to in January. 

The company is showing no signs of slowing down, in my opinion. It continues to regularly beat earnings forecasts and distributes surplus cash to shareholders as dividends.  

With market-leading quality metrics, Games Workshop (LSE: GAW) displays a high return on capital, strong cash flow generation, and an undemanding valuation.  

Harshil Patel owns shares in Games Workshop.

Manika Premsingh: Rio Tinto

With industrial metals’ prices on the upswing, FTSE 100 multi-commodity miners like Rio Tinto (LSE: RIO) are poised for gains. This is despite the upset caused by the pandemic.

When it releases its trading update in mid-January, I’d look out for how it has performed at this unusual time. Lower prices had impacted its previous results, so I’d think that the latest one would be better on that count.

I’d also look out for any forward looking statements to see how if and how long it expects the boom to continue. This will indicate how far its share price can continue to rise, which is presently at levels not seen since 2008.

Manika Premsingh has no position in Rio Tinto.

All are strong businesses, with attractive long-term growth prospects, in my view. Their shares remain temptingly cheap. They’re at discounts of between 16% and 29% to their pre-pandemic 2020 highs. Let me tell you more about them, and see if you agree with my positive assessment.

Bargain UK small-cap stocks #1

Alliance Pharma (LSE: APH) owns the marketing rights to around 80 consumer healthcare brands and prescription medicines. The group had been producing strong sales and profit growth before the pandemic. However, the shares are currently 16% below their pre-pandemic high.

Alliance’s prescription medicine sales will be adversely impacted this year by delays in routine treatments, due to Covid-19. Also, some of its consumer healthcare brands have been hurt by lockdowns. For example, its eye-health supplement MacuShield hasn’t been done any favours by temporary closures of bricks-and-mortar retail outlets and opticians.

However, analysts expect strong growth at the group to resume next year. With products like Kelo-cote — the fastest-growing top five global scar treatment brand — in its portfolio, I reckon Alliance is cheap. It’s valued at 13.7 times forecast earnings, while a prospective 2.2% dividend yield is also decent for a growth company. Its balance sheet is in good shape too, with only a modest level of debt.

Bargain UK small-cap stocks #2

Carr’s Group (LSE: CARR) has an agriculture division supplying animal feeds, supplements and farm machinery. It also runs a UK network of rural stores, providing a one-stop shop for the farming community. Its other division is engineering. This serves a diverse range of industries, including defence, nuclear, oil and gas, and renewable energy.

Last week, the group issued results for its financial year ended 29 August. It reported a number of adverse impacts from Covid-19, such as engineering project delays and restricted access to customer sites. Group revenue was down 2% and underlying earnings fell 18.5%.

Meanwhile, its shares are currently 22% below their pre-pandemic high. This values Carr’s at just 10.5 times its pandemic-depressed earnings. There’s also a 3.8% running yield on its maintained divided. The group has modest debt, and significant growth opportunities within both its divisions. As such, I reckon this is another bargain UK small-cap stock.

Last but not least

Technology company Tracsis (LSE: TRCS) also issued its annual results last week. It reported a 2.5% fall in revenue for its financial year ended 31 July, with underlying earnings down 13.9%.

Its rail technology and services division was generally unaffected by the pandemic. Indeed, it increased revenue by 17%, helped by prior-year acquisitions. However, its traffic and data services division saw an 18% fall in revenue. This was due to some large events and transport data collection projects being either cancelled or postponed.

Tracsis’ shares are trading 29% below their pre-pandemic high. They’re valued at 24.2 times the earnings just reported. However, with almost £18m cash on the balance sheet and no debt, the cash-adjusted earnings multiple falls to 21.7. I think this is cheap for a small-cap technology stock on temporarily depressed earnings. Management remains confident in the medium-to-long-term growth prospects for all parts of the group.