Following the investment principles of stock market experts like Warren Buffett is rarely a bad idea in my book. Here is a UK share I think the Sage of Omaha might love. Let me explain why I plan to continue buying it for my own shares portfolio.
Breaking it down
If you’ve ever gone into a Games Workshop Group (LSE: GAW) store on the street you might feel a bit overwhelmed. I certainly felt over my head when I was surrounded by boxes and boxes of miniature soldiers, battle manuals, and stacks of other fantasy-related gear for the first time.
To break it down simply, Games Workshop serves a few ultra-popular hobby segments. Under its Warhammer brand it makes and sells figures in plastic kits that hobbyists cut out, build, and then paint. The selection to choose from is enormous and Games Workshop sells the paints, glues, and crafting tools that bring them to life.
If they choose to (and most do), enthusiasts can then use their armies to stage tabletop battles, another massively popular past-time. Warhammer sets the rules through its periodically updated rule books and sells dice, buildings, measures, and other gear that wargamers need.
Finally, Games Workshop has created a large library of books and audiobooks based around its fantasy worlds. This allows the company to tap into the rapidly growing fantasy literature market, and has its own legion of fans separate from its core activities.
So what makes it a Warren Buffett-like stock?
Games Workshop was founded in 1975. In that time it has created sprawling fantasy worlds through its Warhammer 40,000 line (launched in 1987) and, more recently its Warhammer Age of Sigmar product (introduced in 2015).
There are other wargaming lines available but none has created the complex range of products and associated lore that Games Workshop has. There’s a reason why Warhammer 40,000 is the world’s most popular tabletop wargame.
This provides the business with what Warren Buffett could call a rock-solid ‘economic moat.’ Games Workshop’s products have built a large and dedicated fanbase over many decades. So it has significant barriers to entry that stop a rival company stealing its business.
Here’s why I bought this UK share
I also like Games Workshop because the growing fantasy wargaming sector has been multiplying even faster following the Covid-19 crisis. The business has been moving into new territories too in recent years to make the most of an expanding global market. Latest financials showed sales up a healthy 6.4% (at constant currencies) in the six months to November.
In addition to this, the Warhammer creator is seeking to supercharge the royalties it receives from licencing its intellectual property to popular media like television and video games. Given the depth of the material that’s available the potential here is huge, as are the opportunities to boost sales of its miniatures.
Like any UK share, Games Workshop has problems to overcome. Costs inflation is a growing problem and so are supply chain issues that are limiting product availability. But all things considered, I think this Warren Buffett-like stock is a brilliant buy for my portfolio right now.
