UK Edition
Questor: this American computer games company qualifies for inheritance tax relief – buy
Questor Inheritance Tax Portfolio: tinyBuild’s bosses retained large stakes when it floated, suggesting they will prove wise stewards
Late last month in another of Questor’s formats we tipped for the wider readership a computer games company called tinyBuild, partly because its executive team had retained a very significant stake in the business at its flotation in March.
Such “skin in the game” suggests that they believe in the firm and we think they will prove wise stewards when so much of their own wealth – £204m at the time of our tip in the case of the chief executive – is at stake.
The company’s shares are quoted on Aim so readers keen to shield assets from inheritance tax may want to consider the stock. The shares will qualify for the “business relief” tax break, according to Fundamental Asset Management, which runs IHT portfolios for clients and hence has a strong incentive to assess qualification correctly.
The shares have slipped by about 2pc since our tip. Although they are quoted in London the firm is American so your broker will probably ask you to fill in a “W-8BEN” form; some will not deal in the shares because of special settlement arrangements.
Questor says: buy
Ticker: TBLD
Share price at close: 259p
Update: Tekmar
This is another stock added to our IHT Portfolio after a tip for the wider readership, in this case in December last year.
The firm makes protection systems for undersea cables and pipes and we foresaw plenty of demand as Britain continued to invest in offshore wind. “There are surely few markets as packed with potential as this one,” we wrote.
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However, the share price has not tended to reflect such optimism and is now close to its lowest level since the firm’s flotation on Aim in 2018. The latest weakness comes after problems with protection systems supplied to a Danish renewable energy firm.
On Tuesday we decided to err on the side of caution and sell the stock, with the proviso that “we can always come back once the picture is clearer”.
While this advice was suited to most readers, we try to minimise changes in the IHT Portfolio because shareholders risk losing, or delaying, their exemption from death duties if they don’t handle changes to their portfolio in the way HMRC requires: investors have to be able to show that the “same money” is used to buy replacement holdings.
We will therefore adopt a “buy and hold” approach and stay with Tekmar for now, although we will keep the stock under review.
Questor says: hold
Ticker: TGP
Share price at close: 50p
Performance update
Since we last updated readers on the performance of our IHT Portfolio as a whole, on Dec 4 last year, Aim has gone from strength to strength and our stocks have shared in its progress.
At that time the average gain of our IHT shares since their addition to the portfolio was 21.7pc and their average outperformance of the FTSE 100 was 34.8 percentage points. Those figures have now risen to 36.9pc and 44.7 percentage points.
Our experience bears out the findings of a study by Interactive Investor, the fund shop, that Aim recovered far better than the main market from the virus-induced sell-off of February and March last year.
“The FTSE Aim All-Share was the only major index where you would have doubled your money had you bought at the low point on March 19 2020 and held on for 12 months,” said the firm. “It returned 103pc over the period, outstripping the performance of the S&P 500 (63.2pc), tech-centric Nasdaq (89.1pc) and the FTSE 100 (32pc).”
Lee Wild of Interactive added: “Aim is home to some of the UK’s hottest companies. They’re typically fast-growing businesses involved in some form of technology, drug discovery or new way of working.
“They are nimble, able to adapt quickly to new or changing circumstances and have potential to be large caps of the future. Because their fortunes can change very quickly, gains can be quite dramatic, which has an obvious attraction for investors looking for a speculative element to their portfolios.”
We would add that Aim is also home to some less appealing businesses and that this is one market where caution and careful selection are vital. We’ll continue to seek out only Aim’s best on behalf of readers.
Read the latest Questor column on telegraph.co.uk every Sunday, Tuesday, Wednesday, Thursday and Friday from 5am.