When I buy shares, I have one thing in mind: to hold them for an extended period of time. Whether they’re heavyweight FTSE 100 and FTSE 250 stocks, or smaller AIM-listed companies, I aim to keep them in my portfolio for at least 10 years.
Games Workshop (LSE:GAW) is a brilliant share I’d buy today for long-term gains. Here’s why.
A unique choice
Games Workshop is a share that’s already provided me with a healthy return on my investment since I first invested in 2020. I expect it to continue.
Its products aren’t mainstream, but herein lies the company’s beauty. It designs, manufactures, distributes, and sells through its own shops and website, fantasy and science fiction miniatures. This narrow focus gives it the edge in the broader games market.
In other words, its wargaming systems like Warhammer 40,000 are unique for their elaborate backstories and the intricate miniatures that players build, paint, and use in games. This creates an immersive experience that goes beyond traditional gaming, and in the process attracts a highly engaged audience.
Cult classic AND bestseller
Games Workshop’s cult appeal has numerous advantages. It means revenues remain more stable during downturns than the broader retail sector. It also allows the company to charge high prices for its “plastic crack“, as its merchandise is affectionately known by fans.
Margins are high as a consequence, coming in at an enormous 69.4% as of May 2024.
But would I really aim to own Games Workshop shares for the next decade? Increasing competition poses a particular threat, as rival games companies muscle in on this lucrative market.
Put simply though, I’m yet to see products that come anywhere close to the quality of Warhammer. Things can change, but today Games Workshop remains at the top of a market it’s led since the 1970s. And it’s investing heavily in new products to stay there.
Opening new fronts
This isn’t the only reason I plan to be a long-term owner of Games Workshop shares.
I’m also encouraged by the firm’s global expansion drive to bring Warhammer to new audiences. And I’m excited by its plans to put its intellectual property on the screen with Amazon.
A television and film deal would create significant revenues in its own right, not to mention boost sales of Games Workshop’s models and boxed games.
Talks to agree creative guidelines for future guidelines are due to end in December. Even if the Amazon partnership fails to launch, I’m convinced another media giant will see the huge potential of Games Workshop’s IP, and put its Space Marines up on the big and small screens.
Premium price
Games Workshop’s share price has exploded more than 2,000% over the past 10 years. It’s up 22% since the beginning of 2024 too.
This leaves the company trading on a hefty forward price-to-earnings (P/E) ratio of 25.3 times. At these levels, the FTSE 250 firm could be in danger of a sharp price reversal if investor sentiment sours.
But this wouldn’t put me off adding more shares next time I have cash to invest. On balance, I believe Games Workshop has the recipe to deliver more stunning returns long into the future.
