Bagging a Bargain From the Biggest AIM Losers

LONDON -- I've been having a closer look at some of the biggest losers from the AIM 100 since the turn of the year, with the aim (sorry!) of finding an overly discounted bargain or two. The AIM 100 keeps things a little less crazy than all AIM stocks.

At the time of writing, the top fallers for 2012 at just past the halfway stage look like this:

Company

Share Price Now (in pence)

% Fall Year 2012 So Far

1. Max Petroleum

2.9

73%

2. Borders & Southern Petroleum (LSE: BOR.L  )

18.25

68%

3. Patagonia Gold

16.5

62%

4. Eastern Platinum (LSE: ELR.L  )

13.75

59%

5. London Mining

133.5

56%

6. Blinkx

37.25

51%

7. Infrastructure India (LSE: IIP.L  )

33

49%

8. Coal of Africa

29.5

49%

9. Andor Technology

317

47%

10. Bellzone Mining

13.5

45%

11. Sirius Minerals

14.25

43%

12. Highland Gold Mining

109

42%

13. Gulfsands Petroleum (LSE: GPX.L  )

111.25

40%

14. Zanaga Iron Ore

68

38%

15. MirLand Development

93

37%

16. Hargreaves Services (LSE: HSP.L  )

732.5

35%

17. African Minerals

298

32%

18. Metminco

5.88

30%

19. Rockhopper Exploration

179

30%

20. Advanced Medical Solutions

70.25

24%

It isn't difficult to spot a common theme here. So perhaps there's a salutary lesson for most investors when it comes to investing in junior mining and oil exploration stocks? These are notoriously dangerous and difficult for the nonexperts to value with much accuracy. They're also the areas many private investors are attracted to due to the potential for explosions in valuation, of course, so it's no surprise to find so many on the flipside.

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The idea of looking at the biggest fallers, for value hunters anyway, is to have a quick initial look at these companies and decide which warrant much more detailed investigation.

Personally, few exhibit sufficient value credentials for me to consider -- and some that do have the wrong kind of ownership profiles or operate exclusively in areas of the world I'd rather not invest in. Some are just too plain difficult to put a rudimentary valuation on for a nonexpert in these sectors like me -- and if in doubt, I always rule them out. Though perhaps there are mining or E&P experts out there who can shed some further light on the possibilities here?

Still, there are a surprising number that look worthy of further investigation to me. Specifically, I intend to add the following stocks to my list to review more closely:

Borders & Southern Petroleum
The Fool's David Kuo briefly explored the reasons behind Borders' 70% fall last week, while the potential value from here was considered on a Foolish discussion thread.

Eastern Platinum
Eastern Platinum could be a good punt for the brave and/or optimistic investors among us. The Canada-based South African platinum producer has had about as good a year as most other platinum miners. But with a market capitalization of 127.6 million pounds, net tangible assets of 549 million pounds and over 50 million pounds in cash at the end of March, it's certainly worthy of a closer look. The brokers expect a pre-tax profit of almost 20 million pounds next year.

Infrastructure India
Infrastructure India does largely what it says on the tin. I hold a few out-of-the-money warrants here that don't have much chance of getting back into profit, it would seem. Net assets of 93 pence per share make the transport and energy investor look cheap, but the likely requirement for cash has spooked investors.

Gulfsands Petroleum
Gulfsands Petroleum operates mainly in Syria, hence the drop. Perhaps this makes it just about the most contrarian oil play around? It also has some activities in Iraq, Tunisia, Italy, and the U.S., but Syria is the bottom line.

My Foolish colleague Roland Head looked at the company's recovery potential on April 3 when the share price was over 30% higher. And at the last count at the end of 2011, Gulfsands had 68 pence per share in cash.

An end to Syria's problems and a lifting of sanctions could be very good news for the company. But how long will it go on -- and how much does the company have left?

Hargreaves Services
Coal and bulk haulage group Hargreaves Services warned on profits when it revealed that problems at its South Maltby coal mine in South Yorkshire at the end of May would impact profits by 16 million pounds. But since then, it surprised on the upside on net debt and is diversified enough to withstand a body blow.

A prospective P/E of less than six and NTAV of around 330 pence per share make it worthy of consideration.

Rockhopper
Meanwhile, Rockhoppper was discussed in depth on the Fool's oil and gas companies discussion board following its farm-out agreement with Premier Oil. Personally, my two-penn'orth in the Falklands is riding on Falkland Oil & Gas, whose potential for glory was explored in another thread, but Rockhopper looks interesting at these levels.

So what do you think? Which, if any, on the list is worth a contrarian's punt?

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David Holding owns shares in Falkland Oil & Gas. He doesn't own shares in any of the other companies mentioned. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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