3 top AIM shares to buy for retirement

AIM stocks are often ignored by investors, but I think this is a mistake. In my experience, there are some very good companies in the London growth market – businesses with strong management and a track record of growth.

Today I want to look at three AIM listed companies that I think have great potential as long-term investments.

NWF shares: 25 years of track record

Small-cap NWF (LSE: NWF) is a distribution business that supplies fuel oil, animal feed, and stores, and delivers food to supermarkets. NWF flies under the radar for many investors, but has delivered reliable profits and growth for more than 20 years.

The company first floated on the AIM market in 1995 and continues to grow. Since 2017, annual revenue has increased from £5.5m to £8.4m.

NWF has also increased its dividend every year for the past 25 years. This is a rare feat, even among the highest FTSE 100 company.

I can see some concerns. Demand for heating oil and road fuel may decline as fuel users use electricity. Another risk is that many of these groups operate with relatively small margins – strong management is essential.

However, I think the risk is reflected in the share price. The business currently trades at a price-to-earnings ratio (P/E) of 12, with a 3.4% dividend yield. I see the shares as a long-term buy at this level.

A quality, family business

My next choice was a lumber merchant James Latham (LSE: LTHM). The business has a market cap of £255m and is one of the UK’s largest timber and panel distributors. The business was established by the Latham family 260 years ago, and remains in family management to this day.

Business boomed during the pandemic construction boom, but profits are expected to fall again this year, mainly due to inflation.

So far, the company has said that demand has remained stable, with the exception of artisanal traders, whose demand has been slowing. Obviously there is a risk that the UK could end up in a worse recession than expected, but Latham’s long history and £36m cash balance give us confidence that the company will weather any storm.

Shares are currently rated at a forecast P/E of nine, with a yield of 2.6%. Given the group’s long record of growth, I think this could be a buying opportunity.

Specialist investors

BP Marsh & Partners (LSE: BPM) is not a household name, but a well-known expert in his field. The company, founded by chairman and 40% shareholder Brian Marsh, invests in small insurance businesses.

It’s a specialist operation, of course, and not much can be done to evaluate a company’s investment decisions. However, I think BP Marsh’s track record speaks for itself.

Over the past 10 years, the group’s net asset value per share has risen from 189p to 445p. That equates to an average annual growth rate of 9%. I think it is a strong achievement for a period that includes a pandemic.

The business is led by a team of experts, with a long track record of success in specialist niches. At a share price of 325p, the shares are selling at a huge discount to book value. I think this AIM stock can deliver solid long-term returns.