This article from Roy Tipping was published in The IRS Report in May 2011

More AIM stocks for TMR portfolio

Since the turn of the year, my computerised share-picking system, TMR, has been very quiet in the senior section of the stock market. Since it is based loosely on the Coppock Indicator, a momentum system, TMR doesn't thrive in a sideways trending market. The FTSE100 index has risen by just 0.25 per cent since January, not a very inspiring performance. Of course, not all shares follow the sleepy herd, and Persimmon (recommended in my March article) maintains its positive status. Even so, looking for investing gains in larger companies is proving very difficult.

Having said that TMR is uncertain about the senior market, it seems to have few reservations about the junior shares quoted on AIM. Since January TMR has indicated that seven companies are worth investigating, and four are going into the TMR portfolio.

AI Claims (Epic: ACS; 28.25p; stop-loss 20p) is the sort of company we wish didn't have to exist. Its former name of Auto Indemnity gives an indication of its field of work: it acts as an intermediary between motorists who have had an accident, their insurers and their repairers. Although the recession has led to a downturn in the mileages that motorists are covering, and, inevitably, the number of accidents happening, this company is increasing its turnover quite rapidly. Its share price has reacted accordingly.

In his most recent interim report, chairman Steve Broughton reported profits up 89 per cent, turnover up 57 per cent and new contracts with insurers successfully negotiated. The forecast figures for 2011 and 2012 follow the same trend. Although TMR takes no account of dividends, a return of around 3 per cent, increasing, is very satisfactory.

It is very difficult, and rather risky, taking a direct stake in China. One of the few Chinese companies quoted on the London Stock Market is China Wonder (Epic: CWO; 24.25p; stop-loss 15.5p). This tiny company - the book value was only £4.25m at the end of 2009 - is registered in Jersey for its AIM quotation. The company is involved in the printing industry in China, particularly in the production of printed packaging for the Chinese pharmaceutical industry. In the company's most recent report, the interim report to 30th June 2010, the chairman Mark Chapman reported turnover to nearly 41 per cent and net profits up 47 per cent compared with the previous year. China is suffering both from the global downturn and internal inflation and any investment in the country is bound to be rather speculative. Even so, TMR is taking a position in this company, but will watch the stop-loss very closely.

Latchways (Epic: LTC; 1075p; stop-loss 727p) is a group of companies that is "dedicated to the safety of individuals working at height", to quote its website. The use of its ManSafe system of protection for workers on office blocks, electricity pylons and so forth, is widespread across the world. Any company in the construction field, particularly one supplying services rather than constructing things itself, is going to be vulnerable at the present. Latchways continues to maintain its position and the forecast is for a resumption of growth in 2011 and thereafter, following a rather stagnant 2010. Dividend growth of 15 per cent announced in the interim report for March 2011 is a further indication of confidence in Latchways' Board. Chairman Paul Hearson pointed out that the difficult market at home was not matched overseas, with strong growth already coming from worldwide opportunities.

The fourth company to acquire a Positive status from TMR is also in the construction industry: Renew Holdings (Epic: RNWH; 72p; stop-loss 49.75p). With a history going back some 300 years, a series of acquisitions, and a change of name in 2005, the group has two main areas of activity. The Specialist Engineering half comprises five subsidiary companies working in the nuclear, rail, land and water fields. The Specialist Building half comprises three subsidiary companies working in the retail, social housing, science & education, and restoration & refurbishment fields.

The group has been deliberately moving from a substantial dependence on the latter - it comprised 85 per cent of the company in 2006 - to a much more equal division, with the Specialist Engineering reaching 44 per cent of revenue in the most recent annual report. After reaching a peak in turnover in 2008, the group's figures for 2009 and 2010 were disappointing, not surprising in the sharp recession in the construction industry. Forecasts for 2011 show the group getting back to about the same level of turnover as in 2007 - much better, if realised, than for the last two years. The share price has doubled in the past six months and I don't see it doing much better than that over the next couple of years, but there is a solid dividend to add to TMR's optimism.

In March I mentioned that May looked like being a poor month for investing in the senior market, and although TMR is no longer looking at a major bear correction in May, a small one is still possible. TMR reckons that there is the possibility of a much greater decline at the start of 2012, though whether this will be just a sharp correction or the end of a three-year bull market, we will have to see.