Five AIM Shares For Your ISA

Published in Investing Strategy on 25 March 2010

Contrary to popular belief, you can put some AIM shares in an ISA.

AIM shares for your ISA? Hang on, that's not possible, is it? Aren't investors prohibited from holding AIM shares within an ISA?

That, I imagine, will have been the reaction of many of you. And certainly, there have been reports here on The Fool of investors being forced to sell ISA shares -- sometimes at a loss -- when companies have de-listed from the main market and moved to AIM instead.

But it's not quite that simple. In the Budget this week it was announced that a consultation will be launched this summer as to whether AIM shares should be allowed in. However, in certain circumstances, you can already hold AIM shares in an ISA. And some of the shares involved are worth taking a look at.

Risk avoidance

The restriction on AIM shares makes a lot of sense. ISAs are a government-backed scheme to encourage citizens to save -- for their old age, for instance -- and in that context, AIM shares must be considered riskier than main market listings.

By restricting investors to main market holdings, the government is trying to ensure that investors' savings will be there when needed, rather than swallowed up by some speculative and badly managed venture that subsequently went pop.

But the prohibition isn't a blanket ban. Investors can take stakes in AIM shares, provided that those shares are also listed on another recognised exchange. And not only do a number of AIM shares meet that criteria, they're also decent-sized businesses.

Dual listing

Such dual listings occur when a company's operations are overseas, and it lists on AIM as well as in its own country of incorporation.

I mentioned one such business last week: Asian Citrus Holdings (LSE: ACHL), which I wrote about back in September, since when it's climbed by 80% and thrown off a decent dividend.

But there are others -- including a number with decent-size market capitalisations.

Choice selection

Here, for instance, are five AIM shares all eligible for inclusion in an ISA, and each with a minimum market capitalisation of £400 million.

And for investors put off by corporate governance in emerging markets such as China -- Asian Citrus operates in China and is listed in Hong Kong -- all five are from the developed world: two from Australia, and three from Canada. Four are miners, one is an oily.

CompanyCountryMarket
capitalisation
Coal of Africa (LSE: CZA)Australia£689m
Medusa Mining (LSE: MML)Australia£404m
Eastern Platinum (LSE: ELR)Canada£616m
Western Coal (LSE: WTN)Canada£867m
Bankers Petroleum (LSE: BNK)Canada£1.42bn

Will I be stuffing any of these into my own ISA? I'd need to do a lot more research. But on the face of things, these are decent-sized businesses that are headquartered in developed economies. Four of them are profitable, none of them pay a dividend, and the forecast P/E varies between 43 and 7.

Want to know more? For the miners, here's a good place to start. For the one oily, look here instead. And, as always, here on The Fool you can access, free of charge, full financial data and published RNS's.

> Time is running out if you want to use your tax-free ISA allowance for 2009/10. And remember, if you're 50 or over, your limit has now been increased to £10,200. Protect your investments from the taxman with a Motley Fool Self Select ISA.

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Comments

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Jon69XYbio 25 Mar 2010 , 5:30pm

Medusa MML, mainly gold, have actually paid a 'dividend' recently with a free share issue 1 for 10 issue to existing holders. Can argue it diluted them but share price up on it. Motored since 30p but DYOR!

mahdave 26 Mar 2010 , 4:27pm

Maybe, Jon69XYbio has some relevant information, but as far as I am concerned, I have never read about them in my Sunday papers or Investor's Chronicle. So they , at best, must be shots in the dark. Not my idea of risking the money in my ISA.
How about some commonly known AIM shares for my type of guy's ISA's ?

ColinTat 26 Mar 2010 , 6:02pm

Hmmm suggesting these commodity shares when we're just about looking at govt spending having to tail off?

Leave off. All these will be the first to drop at the start of this years third quarter. Long term coal will prosper with regards to China's needs but you'l be a fool to buy when commodity markets are pumped full of money for nothing.

HawthornDweller 26 Mar 2010 , 10:06pm

Much more useful than allowing AIM shares would be to allow cash holdings. If you save for retirement in a self-select equity ISA, there will be occasions (say in a falling market) when you want to move partly or wholly into cash. You cannot do this unless you take it out of your ISA, losing the whole point of such long-term saving.

Tara1492 27 Mar 2010 , 3:17pm

I read somewhere that you can keep cash in a shares ISA if you have 'market reasons' to do so. I often have a bit of cash in my pyo shares ISA and no-one has ever said anything.

bennyboy13 28 Mar 2010 , 10:59am

That's right Tara1942 - if you sell shares in a shares ISA, you can hold the cash there until "conditions are right" to invest again. The rate paid is usually very low but you can do it.

Samnalf 29 Mar 2010 , 12:16pm

I believe cash held in a Stocks and Shares ISA has tax deducted from any Interest earned so the HMCR are relaxed about cash held this way.

One of the advantages of owning AIM listed stocks is the IHT exemption for shares owned for a certain period prior to Death.Presumably this would NOT apply if the same shares were bought through a different exchange?

allyjg19 26 Mar 2012 , 10:52pm

would shanta gold (SHG and AIM listed) fall into the same classification as the above

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