I just put the most important message right on top of this article:
I recommend everyone to go A-Z. Everyone. Well, at least everyone who is interested in stock picking. No need to go through 600+ tickers, but pick a smaller local stock exchange, an industry you are interested in, the results of your favorite stock screener, … and look at every company.
With this article I try to explain how I did it, what I found and why I think it was a valuable exercise.
Wrap-up
Some basic statistics for all 646 AIM companies I looked at:
44% operated profitable, 36% unprofitable, 20% did not have revenues
15% were mining companies, 7% energy, 5% biotechs
I considered 85% of all companies to be a ‘pass’
These were the only statistics I tracked. Keep in mind, I spent between 1 and 15 minutes with every covered company. It’s very likely I misunderstood some business models, didn’t get the elevator pitch, considered a company in temporary troubles a generally bad business, or a usually bad business a good one due to one-offs. So these categorizations might not be fair in each case.
One industry that stood out to me half way through the A-Z was professional services. While I passed on all of them due to low interest in this industry, the fundamentals and rather low valuation got me interested to take a closer look one day. E.g. BTG (changed ticker from BEG), KEYS, KGH, MHA. I also got interested in real estate service companies like WINK or TPFG. I was surprised not finding many Med-Tech companies.
Also, passing on 85% of companies means I considered 15% interesting enough to watch no matter the industry, you find the list at the end of this article:
The best, the worst, the most unique, the weirdest
I don’t feel like that I came across the one fat pitch. But one company my mind always goes back to is Angling Direct, a fishing equipment retailer. Not because it’s the highest quality or the cheapest company in the whole list. But it combined many things, forming a good setup. It’s up 40% since then. I wrote:
Easy to understand business, straightforward growth strategy, founders involved, the fishing club should lead to high customer loyalty. Assuming they grow sales mid single digits, increase margins in the UK and reduce losses in Europe, in combination with buybacks, this seems to be the most interesting setup so far.
CFX and VLE stood out as the only share cannibals on AIM. VUL, a company ‘aiming to create the UK's leading regulated ePharmacy through buy-and-build’, might have the most overqualified management team on AIM.
Hard to chose the worst one. There were many pre-revenue companies, many with high losses on little revenue and when I saw a company with horrible financials, I was ready to say ‘pass’ before I found out why exactly it looks horrible.
The most unique company likely was FIH, a group providing various services on the Falkland Islands. Not the services are special, but the location. It’s a group of Islands in the South Atlantic Ocean, 600km away from the coast of Argentina, with a penguin-to-human ratio of 300:1. Over 1 million penguins live with less than 4000 people. Rather something you can tell your investor friends than a good pitch.
The weirdest thing to read was an interim report of Panther Securities. A random investment company, nothing special. But the Chairman used the interim results to tell us his life story on how he learned that women are more than just housewives who actually can be part of the business world. But because he was not happy with UK’s chancellor Rachel Reeves, he was wondering whether he has to change his mind about women in general again.
Also worth mentioning United Oil & Gas here. They launched a podcast about their pre-revenue mining project. Talking about the company’s development in a podcast is one thing, but launching your own podcast with multiple episodes screams ‘we want retail investor’s attention and money’.
Patterns
I didn’t track any patterns numerically, so these are rather some overall impressions.
Economic patterns:
Many asset managers reported outflows in the last 12 months.
Engineering/construction service companies always report delayed projects.
Companies exposed to real estate markets reported subdued, but recovering underlying markets.
Most Chairmans/CEOs love to complain about increases in minimum wage as they fail to pass costs to customers. One company that stood out here in the leisure industry was YNGA.
Overall, many cost reduction programs ongoing. Likely due to the combination of economic slowdown, cost inflation and the fact that AIM-listed companies are smaller and of lower quality naturally. Most cost reduction programs appeared to be successful, what doesn’t mean that all these companies suddenly operate profitable now.
IR related patterns:
The more press releases, the worse the fundamentals.
Of course investor communication is regulated to some degree, but if a company sends you an IR E-mail announcing their project related podcast, you should probably run. Same with companies announcing every little product launch. Or take a look at SBAR, a no-revenue company ‘creating a marketplace for AI Agents’. SBAR announced the integration of a payment checkout on their website. Wow, impressive. You can likely vibe-code it in 30 minutes nowadays. That was after the announcements to buy some bitcoins. First things first.
The counterpart for that are usually family businesses like TFW. I am pretty sure if someone would set up an index containing the 20% of companies with the lowest number of press releases (excl. daily buyback news and such) it would perform better than the average.
The more corporate bla bla, the worse the fundamentals.
I believe that correlates with the number of press releases. Companies try to present themself in good lighting, fair. But management teams who can simply point at great fundamental development don’t have to overwhelm you with buzzwords in never ending ‘we are great’ monologues. After looking at thousands of press releases, it became annoying when a Chair or CEO talked a lot without saying anything. If that is combined with a very vague business description that makes me end up being like ‘I have no idea what this business does’, it’s kind of a red flag already. Add ‘performance was in line with market and management expectations’ without sharing what these expectations were and the bullshit bingo is completed.
But to my surprise, I didn’t come across as much AI talk as I expected. While there were a couple AI-native companies (e.g. GNIP or PR1), most companies didn’t even mention AI. And when it was mentioned, it mostly seemed appropriate, only in rare cases it was part of corporate bla bla.
Exceptionals are not always exceptional
Some companies love to adjust for ‘exceptionals’ which somehow occur every year. Most often relating to restructuring and M&A costs. I am not generally hating on ‘adjusted’ earnings here. In many cases adjusting for certain costs, especially non-cash expenses, does make sense. But a serial acquirer adjusting for M&A costs is like a fashion company adjusting for marketing expenses. Ask yourself if these exceptionals are necessary to run the company, or to execute the capital allocation strategy. If yes, the adjustments likely don’t make sense. They serve to show the underlying profitability, fair, but it does not matter at all when management isn’t able to ever truly reach this level of profitability without fundamentally changing the business model.
There is always a story they want to tell and it’s never their own fault
From all the companies whose fundamentals were not completely horrible, probably 50% presented the story of 'resilient performance despite weak end markets’. While I do believe many end markets were not in best shape in the last 12 months, reading this story 200 times definitely lowers the respect for ‘resilient performance despite weak end markets.’ Also because some ‘resilient performances’ were not resilient at all, and others were too good to believe the story of weak end markets.
Further, when financials look bad, there is always a reason outside the companies scope. It’s the consumer sentiment, the delayed projects, the increase in minimum wage, the macro economic environment, … It might not be wrong, but I feel like most management teams act like they wouldn’t be responsible for weak performances. But when fundamental development is great, it’s always the cutting-edge technology and laser-focused team making it all possible.
The Process
I want to give you an idea how I worked through the tickers.
I sorted companies by the full names on the LSE website. After going to a company’s page, I looked at the ‘our story’ tab to get a business description and the link to the company’s homepage. Though in some cases the links were wrong and the business descriptions were out-of-date.
Then, I opened the ‘Analysis’ tab, where all the press releases are listed and looked for trading updates, recent results, management changes and anything else that seemed important. Seeing press releases like ‘transaction in own shares’ showed me there is an active buyback program. Certain others give you a hint on potential M&A deals.
Only after I did that, I looked at IR presentations, insider ownership, management and scrolled through the website. And I think this order is important. Looking at raw regulatory fillings first makes sure I’m less biased by management’s storytelling or well-designed IR websites.
Sometimes I used Koyfin to get an overview of historical fundamentals and valuation.
I immediately wrote down every relevant piece of information I found and in the end, I used a messy google sheet to track the few things I tracked.
All in all that worked out nicely. I nearly never used AI, except when I really did not understand a business model or a certain press release.
As I wrote about every single company, even the ones I’d never buy, it was not the most efficient process. But I think it’s important to write down why you dislike a company, not only what’s nice about the obvious high quality business.
What I would do different
Two important things here: Categorization and note-taking.
As I started this journey, I wanted to put companies in three categories: Buy, Watchlist, Pass. But over time I noticed this is too simple.
‘Buy’ in my case meant ‘stop all A-Z work and spend more time on this company.’ I did not put a single company in this category, nevertheless I think this category is useful, maybe the naming isn’t appropriate.
The problems were rather related to ‘Watchlist’ and ‘Pass’.
Companies on the ‘Watchlist’ have very different setups and characteristics. Some should be watched closely over the next months, others are steady quality companies in which the focus is on noticing when they get cheap or lose the ‘quality’ label, while others are rather a ‘pass for now, but watchlist for the longer run’, like younger companies gaining traction. Putting all these into one box completely understated the different dynamics.
Same for the ‘Pass’ category. Some are horrible companies that likely never deserve a second of attention again, while others seem okay-ish and should actually be watched from distance to notice in case things change, while others are companies about to be acquired or delisted, cash shells, or potential bankruptcies, which all deserve their own category as my view on these stocks may change e.g. they disappear from the public markets, cash shells become an operating business, or nearly bankrupt companies actually survive.
Of course I have all my notes, so I can still distinguish between different dynamics in these categories, but when you have notes on 646 tickers some more detailed organization is necessary.
In my note taking system I changed the categorization to a score from 0-7, the score serves as a priority level. It might not be perfect yet, maybe I come up with sub-categories on day, but now it looks like this:
0: Companies I own, highest priority to stay up-to-date.
Categories 1-3 include all companies I am interested in, sorted by interest.
1: Companies like Angling Direct, the most interesting setups that deserve my attention in the next months. The pitch is somewhat ‘clean’, it’s rather about further verification.
2: Good ones as well, but not as good as 1 or not as time critical. E.g. quality companies on a higher valuation, companies on a path to profitability but not there yet, strategic reviews of solid companies ongoing, … little flaws which give me more time.
3: Mentioned professional and real estate service companies for example. I’m interested, but there are many questions in my mind or these companies look good overall, but have bigger flaws bothering me like higher debt loads.
Category 4-5 include companies that are not uninvestable, but are also not really interesting for me
4: Bad to Okay-ish companies, mostly consistently unprofitable companies or those operating in industries I dislike, but not hate, such as fashion.
5: Companies in which it is expected they will turn into one of the other categories. Mainly cash shells (which turn into 6 or 1-4 when another business is acquired) or companies about to be delisted, e.g. in the process of being acquired, taken private, leaving the exchange, or working on a big acquisition (what often leads to suspension of trading on AIM due to a fundamental change in the business model).
Category 6-7 include all companies that are uninvestable personally, or literally uninvestable
6: Mainly no-revenue co’s, Industries I strictly avoid (e.g. Mining), potential frauds, close to bankrupt, …
7: Left public (accessible) markets, meaning companies that were category 5 in the past. Not every 5 becomes a 7, but every 7 was a 5 before. Technically I could just delete these notes, but who knows, maybe an old note will be helpful one day.
Note Taking System
At the beginning I didn’t put my notes elsewhere, I only had them on Substack. The day I wanted to write a second note on a company, I had to think of a system. Now, I have them all in Obsidian, a rather complicated note taking tool. There are many others like Notion or Evernote. Journalytic is great website for taking notes on stocks.
For me it’s important to transfer my notes into a table view and to connect notes to each other, obsidian works well for that. Notion too. But a note taking system is one you will rather develop over time, if you do not use a specific tool like Journalytic.
I believe a system to look back at notes is very important, otherwise the A-Z information you gathered is only relevant for the day you look at a company, while the value of A-Z’s comes from looking at stocks over and over again, comparing new to old notes, following changes, …
Now what?
Now I have my hundreds of notes, have some tickers on a watchlist. While this ate up a lot of time, I believe the most value from this work will arise in the future.
The plan is to follow all the companies, based on the assigned numbers. While I will closely follow companies in categories 0 - 3, I might never look at companies in category 6 again, and check companies in category 4 and 5 once a year or so. I’m not stressing myself over staying up-to-date with every company. I am a private investor and I do this for fun.
Whenever I come across a new piece of information, I will write a new note for the given company. Over time my judgement of changes will become better, more accurate, and this will improve my performance, at least in theory. Maybe it won’t, but it’s fun anyways. Especially temporary issues in usually good companies should be easier to identify. In case I ever decide to look deeper in a company, I got my notes as a baseline.
Also, I got a database of companies I can compare new companies with. This database forces me to ‘do something’ with a new company I learn about and not just read and forget about it.
A year ago I didn’t expect myself to ever go A-Z and turn over all rocks I can find. But I am happy I did that. It taught me a lot, let me built a system to manage all the information and hopefully is just the start for more A-Z’s and compounding knowledge. Of course, I have no idea if this ever leads to better investment returns, but it’s a process that worked for me from a behavioral perspective.
Thanks for reading. If you have any questions, feel free to reach out.
Thanks for sharing and great work with the whole A-Z!
I really like the classification method 0-7 for the companies. At the end, you need some extra priority order in the watchlist + sometimes a company is not interesting only because of valuation, but after a while some multiple compression could make it interesting.
About the professional services, I really like the permanent low valuation for more or less the whole sector + low capital intensity + cash rich with big shareholder returns + possibility of bolt-on acquisitions in the private sector...