Make money on these five quality AIM shares

Markets hate uncertainty and that has been to the fore in the past few months during the European Union (EU) referendum process. The vote to leave the EU in this week's historic ballot will not change that uncertainty - at least in the short-to-medium term.

On top of the negotiations to leave the EU, there is the prospect of a new prime minister after a Conservative leadership battle. That means that Article 50 in the EU constitution is unlikely to be triggered until there is a new prime minister in October. The complicated negotiations will then really get going.

The 'Leave' vote was 51.9% of the total, while the 'Remain' side got 48.1%. That is a majority of more than one-and-a-quarter million votes. The turnout of 72% was impressive. The barely-remembered national referendum on the proposal to change the electoral system to the alternative vote method had a turnout of 42.2%. The Welsh elections a few weeks ago had a turnout of 45%, but the Welsh referendum turnout was in line with the UK average.

The margin of victory is relatively narrow, but it does not currently appear that anyone is trying to use this as an excuse not to push ahead with Brexit. There had been talk in the weeks prior to the vote that if the vote to leave was a very narrow one then Parliament might not ratify the decision, but this is unlikely, particularly given the high turnout.

The London Stock Exchange insists that its proposed merger with Deutsche Boerse will not be scuppered by the vote, but the short-term prospects for the London market are definitely uncertain.

Investors have not been keen to commit to new investments in the past few months and they have been increasing their cash positions. A number of potential AIM floats were waiting until the EU vote was over to start the process of joining the junior market, but it appears a strong possibility that these floats will continue to be delayed for the time being or even terminated.

Potential Brexit has not been the only economic-related concern - there are also worries about the US economy and the lack of a sustainable recovery in the euro zone - but it has certainly been in the minds of investors and has had a significant effect on investment decisions.

Putting the stockmarket in perspective, the recovery prior to Friday morning has effectively been lost on Friday. The FTSE 100 index was 5,950 when the date of the referendum was announced back in February. The close on Thursday was 6,338.1 and, although the initial fall was to just below 5,800, there was a recovery later in the day to take the index above 6,200.

A sharp slump

Prior to the vote, Nigel Green, boss of financial adviser deVere Group, said that the market was assuming that there would be a vote to remain in the EU. As later polls showed a slight lead for 'Remain', the markets picked up and regained ground.

Therefore, it is not surprising that the initial slump was so sharp. The large decline in European markets was something that was more unexpected. That reminds everyone that the uncertainty is not just in the UK, but across the EU as a whole, so there could be a negative effect on other European economies - which will have an additional influence on the UK economy, where growth is likely to slow anyway.

AIM has not fallen as sharply as the main market. One thing to remember is that smaller company share prices lag those of their larger peers, so there could be a further decline at the smaller end of the market next week, even if larger company share prices stabilise.

The important thing for investors in smaller companies and AIM shares is how the vote will affect these companies. Banks and insurance are two sectors that will be hit by the 'Leave' vote but, in terms of AIM, there is little exposure to those sectors.

A survey of UK mid-cap companies prior to the vote by Edison Investment Research showed more than three-quarters of the companies still planned to go ahead with their existing capital expenditure plans even after a 'Leave' vote. There was no indication how those original plans had been affected by the prospect of the vote. The majority of the management surveyed believed that the UK should remain in the EU, though.

Existing work in the EU is not going to be hit, but winning additional work may become much more difficult even prior to the exit from the EU.

Who wins?

Foundries operator Chamberlin supplies turbo charger castings to European automotive components suppliers and this is a growing market for the company, which has had its problems in recent years. Growth in turbo charger component sales has offset some of the problems elsewhere. The existing contracts will continue, but it may be more difficult to win additional contracts. Of course, without knowing the new trade terms between the UK and the EU it is impossible to assess how competitive the likes of Chamberlin will be.

I mentioned in my previous article on the EU referendum that one of the early effects of Brexit would be a decline in the value of sterling, which fell to a three-decade low on Friday. That decline has been steepened by the fact that indications of a win for 'Remain' had seen sterling strengthen in recent days.

That means that if a company makes a significant proportion of its profit outside of the UK it will make more in pound terms. One of the companies I mentioned last time was Craneware, which is based in Scotland, but the market for its software is hospitals in the US. Surprisingly, the Craneware share price has fallen back by 3% this morning and this could represent a buying opportunity. Craneware is highly rated but the market for back office and charging software for US hospitals is growing.

The share prices of the other two companies I mentioned - fast-growing supplier of localisation, testing and artwork services to the electronic games sector Keywords Studios and accesso Technology, which provides ticketing and virtual queuing technology - have held up better.

While some people have a short-term view when investing, investors in shares should predominantly take a longer-term view. However, uncertainty brings volatility and that provides opportunities to make money. An unusually large slump in the share price of a company with a strong track record will provide a chance to buy. These opportunities will appear regardless of sector.

The sectors that are less exposed to the 'Leave' vote are the likes of pharma and technology, although these companies can be inherently more risky anyway depending on the point they have reached with their products. For example, if a commercial drug is developed, it will be worth significant amounts of money whether the UK is in or out of the EU. Whether leaving the EU will complicate gaining approval for new drugs is another matter.

Software and technology can also provide opportunities to gain exposure to major new products, but there are also more mature technology-focused businesses.

Transport optimisation services and software provider Tracsis has a strong growth record and regularly beats its broker's forecasts. There are opportunities to grow in the UK and overseas with little exposure to the EU - there is some business in Scandinavia. Tracsis is not cheap, but it is a quality company.

Online marketing services provider dotDigital is more of a services provider, but it does develop its own technology for its platform. It has a strong growth record in the UK and its international expansion is focused on the US and Australia. There is even a chance that UK businesses may need to increase their marketing activities if the economy slows down.

The important thing at the moment is to focus on quality companies where, even if there are difficulties ahead, they are strong enough to ride them out and continue to prosper over the longer-term.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser