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3 top FTSE tech stocks to buy in April

Jamie Adams — Fri, 09 Apr 2021 12:28:42 +0000

These UK-based tech stocks seem to me like good discount buys right now following recent dips. That’s why I’m considering adding them to my portfolio this month.

Ocado

Ocado Group (LSE: OCDO) is primarily known for its online grocery operations.

Naturally, Ocado saw an influx of business in 2020 as more consumers and companies migrated online, making it a promising British investment for me. Its online grocery revenue grew by 35% to $2.18bn in 2020 thanks to an e-commerce boom driven by the pandemic. This figure is expected to increase if the habit of online grocery shopping remains sticky post-Covid.

The biggest threat to Ocado Group at the moment is increasing competition, I feel, including Tesco and Sainsbury’s. Should it lose ground to such competitors, the company’s bottom line could be at risk.

But I feel it has enough in its unique technology offer continues to grow. It has seen its stock price soar 54% in the past 12 months from 1,368p to 2,115p. However, with the Ocado share price down almost 15% to 2,115p from 2,481p in three months, I’m adding it to my watchlist as a discount buy.

Games Workshop

Games Workshop (LSE: GAW) is a British manufacturer of miniature wargames, best known for its ‘Warhammer’ series. This ‘nerdy’ company may not seem like a typical tech stock, but its 5m online users beg to differ. It’s one of the FTSE 250’s top performers of the past decade, soaring more than 1,800% in that time. And, the Games Workshop’s share price has soared more than 110% in the past year, from 4,896p to 10,402p today.

Operating profit doubled to £92m in the six months ended November 2020, while the company currently forecasts a repeat doubling of operating profit. Online channel revenue has also surged 87% as consumers continue to enjoy gaming during lockdown.

One major concern for me is that as lockdowns end, gamers who’ve come to the firm’s products anew could lose interest, resulting in a sales decline. The company has a big job ahead of it to maintain this strength. But with an expensive P/E ratio of 35, shareholders will need to see long-term growth potential in order to justify the price.

Yet I believe that Games Workshop has not yet scratched the surface of its online potential. That’s why I’m adding it to my watchlist now.

Blue Prism

Blue Prism (LSE: PRSM) makes robotics software in more than 60 countries and added 490 new customers in 2020, while maintaining a gross revenue retention rate of 98%. Its board has also discussed plans for a US listing, where it believes it could receive a higher valuation, based on recent performances of US-listed tech stocks that saw their share prices soar in the past year.

The company is currently valued at more than £1.25bn, and despite coronavirus-induced volatility in 2020, its share price has risen 15% in last year from 1,121p to 1,299p.

Its £40.3m 2020 losses are a concern for me. Although these losses had narrowed year-on-year, the company was forced to restate its financials in January, meaning that the actual loss was £5m higher than originally stated. Though this was just a once-off event, it isn’t a good look for the company and leaves a black mark on its record.

For now though, I’m giving Blue Prism the benefit of the doubt and adding it to my April watchlist.

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The Motley Fool UK owns shares of Games Workshop. The Motley Fool UK has recommended Ocado Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

£2k to invest in UK shares? One stock I’d buy today, and one I’d ignore

Harvey Jones — Mon, 14 Sep 2020 13:25:34 +0000

If I had £2,000 to invest in UK shares today, I’d feel spoilt for choice. There are loads of amazing opportunities out there right now. The following two stocks have caught my eye for very different reasons. One is dirt-cheap after a share price meltdown, the other is expensive after making investors seriously rich. Which would I buy?

Over-50s specialist Saga (LSE: SAGA) was in freefall well before the stock market crash in March, and Covid-19 has made a bad situation worse. The group’s motor and home insurance business has held up pretty well, but its cruise and travel operations have been hammered.

Saga has just posted a punishing 51.4% fall in first half revenue to £192.4m, with profit before tax down 70% to £15.9m. The losses are mostly down to its travel business, which has been on hold since mid-March. Worryingly, it continues to burn through £6m-£8m a month. Saga hopes to resume travel operations from next April, but ultimately, that is not entirely in its hands.

UK shares are struggling

Like many UK shares, Saga’s problems could offer investors an opportunity. The strategic £100m investment by Sir Roger De Haan and planned £150m capital raise will help keep this ship afloat until better times. I’m impressed by customer loyalty, with 65% of customers retaining their cruise bookings. With the share price now trading at just 1.73 times earnings, Saga is cheap.

Management has a big job on its hands if it wants to turn this crate around. Saga is a strong brand but price-sensitive customers are not as loyal (to any company) these days. You won’t even get a dividend while you wait to see whether the group will succeed. Saga has a long way to go. I’m watching on the sidelines for now.

By contrast, Nottingham-based fantasy miniature figures specialist Games Workshop Group (LSE: GAW) is one of the best-performing UK shares right now. The Warhammer maker has proved adept at building loyal communities, and generating interest both online and through its physical stores. Investors have reaped the rewards.

I’d buy Games Workshop

Over the last five years, this has delivered astonishing share price growth of 1,623%. If you loaded up on its shares during the stock market crash, congratulations. They have now doubled in the last six months.

The Games Workshop share price jumped again last week after it reported sales totalling £90m in the three months to 30 August, up more than 15% from the same period last year. That is despite shop closures during the lockdown. The group also declared a dividend of 50p per share.

I am always wary of recommending UK shares after a fantastic run of success. Games Workshop isn’t cheap, trading at 46 times earnings. However, it is now looking to expand its world into video games, films and television. Its loyal customers are likely to follow.

If it manages that, Games Workshop could maintain its momentum. I’d put all my £2k into this, and skip Saga for now.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

This stunning growth turned £10k into £127,500k in five years. Here’s what I’d do now

Harvey Jones — Tue, 14 Jan 2020 11:23:45 +0000

Everybody loves a multi-bagger as they can really turbo-charge your overall investment returns. But they don’t come along that often.

It takes a special company to deliver that kind of return, especially if they can do it in a short period, as this amazing growth stock has done.

Games theory

FTSE 250 growth hero Games Workshop Group (LSE: GAW) is up an incredible 1,175% over five years, turning £10,000 into £127,500. If you buy a stock like this at the right time, it can transform your wealth.

Today it is up another 6.35% to 405p after its half-year report showed revenues, profits and dividends continuing to rise at a record pace.

The group has done this by delivering a niche product for a fiercely loyal audience. The Games Workshop share price is flying high thanks to a committed army of miniature war game enthusiasts. Brands such as Warhammer Age of Sigmar and Warhammer 40,000 enjoy dedicated communities, and the company has proved adept at building engagement with their followers.

Gams Workshop has a successful website driving sales but has made a real success of its physical stores, by making them an exciting destination for Warhammer fans, staffed by like-minded enthusiasts.

This is a global operation too, and may break new ground as it develops a TV series, based on the Eisenhorn series of novels, although that is still at an early stage, with no production contracts signed yet.

Workshop of the world

Revenues grew £148.4m in the year to 1 December, a rise of 18.5% year-on-year, with operating profits up 45% to £59.2m.

Management declared a dividend of 45p per share, in line with its policy of “distributing truly surplus cash”, and the Games Workshop stock now delivers a forecast yield of 2.6%, which is impressive given recent growth.

Trolls and goblins may not be your thing, but those who love that world, live it. Games Workshop has to be careful though, because this kind of consumer can easily feel let down if it makes a wrong move, and the planned TV show evidently has risks.

Hammering away

Given the group’s instinctive feel for its customer base, it is a risk worth taking. TV is a hit and miss business, but imagine what a successful TV show could do for Games Workshop? If it works, this could only be the start of big growth.

Naturally, the stock is no longer cheap, trading at 26.9 times earnings. Yet there is no sign of it slowing up, with the share price doubling in the last year. I worried about the high valuation in November, but still rated it a buy. I reckon it is today, as well.

Naturally, you cannot expect Games Workshop to turn £10,000 into six figures over the next five years, given its sizeable market cap of £2.2bn. City analysts reckon earnings will slow, from a breakneck 126% in 2017 and 94% in 2018, to 12%, 5% and 2% over the next three years.

However, I reckon Games Workshop still has plenty of fight left in it.

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No savings at 40? I’d buy this FTSE 250 seven-bagger right now

Harvey Jones — Tue, 12 Nov 2019 16:56:03 +0000

International aerospace, defence, and energy markets specialist Meggitt (LSE: MGGT) is renowned as a strong, long-term generator of cash, with a progressive dividend policy to boot. It’s well worth a look, but it’s the second stock in this review that really grabs me.

Stay grounded

Yet don’t overlook Meggitt, which has been going great guns over the last year, its share price up 20%, despite suffering knock-on effects from the Boeing 737 MAX groundings.

Today’s update was otherwise fairly positive, with Q3 trading stronger than previously anticipated, and overall group revenue growth of 11%, boosted by a particularly strong performance in its defence division, where revenues grew 20%.

The £4.83b group is upgrading its guidance for full-year organic revenue growth, if only slightly, from 4%–6% to 6%–7%. However, margins will be squeezed by the Boeing groundings and “pressures across our internal and external supply chain driven by the unprecedented ramp up in new aircraft production”, with full-year operating margins expected to be at the lower end of guidance, between 17.7%–18.2%.

Investors no doubt wanted more, given that the group trades at a relatively pricey 17.7 times forward earnings. The yield is 2.8%, with cover of 2.1. That may seem low, but as I said, management is progressive. Earnings can be variable due to contract timings, but City analysts are forecasting 7% growth this year and 11% next.

Today’s results may seem slightly underwhelming but the long-term flight path still looks solid to me.

GAW, GAW, not war, war

Meggitt’s not half as exciting as my other FTSE 250 stock pick, Games Workshop Group (LSE: GAW), which manufactures miniature war games such as Warhammer Age of Sigmar, and describes itself as “the largest and the most successful tabletop fantasy and futuristic battle-games company in the world”. The £1.73b group is up a thundering 725% over the past five years, and is continuing the momentum, with 45% share price growth in the last 12 months.

Defensive investors traditionally migrate to tried and trusted sectors such as pharmaceuticals and utilities, but maybe you’d be better off targeting niche companies like this one, with its army of die-hard, ever-so-slightly nerdy hobbyists. Its loyal fanbase insulates the company from many retail pressures, while its network of stores backs up its online operation.

Games Workshop’s latest trading statement is brief to the point of brutality, reporting that sales and profits are ahead, with royalties receivable doing particularly well due to the timing of guarantee income on signing new licences, while its results for the six months to 1 December 2019 are sales of not less than £140m and profit before tax of not less than £55m.

Better still, the group is expanding internationally, with stores in the US and Europe, so it’s no fantasy to suggest current growth rates really could continue. The group trades at 23.7 times forward earnings, but in fact I was bracing myself for a more expensive valuation, and I like its return on capital employed figure, of 90.3%. Some reckon this visionary group could be on course for the FTSE 100.

The yield is 2.9%, covered 1.4 times, which is solid when you take into account its recent blood and guts share price growth. The Games Workshop share price could help you battle through the mortal realms to achieve your ultimate goal: a more lucrative retirement.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Meggitt. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

These FTSE 250 stocks have created returns above 50% in 12 months! Can they keep delivering?

Royston Wild — Sun, 21 Jul 2019 08:30:38 +0000

If you’d bought into Games Workshop Group (LSE: GWP) around the middle of the decade you’d be laughing right now. The business, one of the leading manufacturers and retailers of fantasy figures and board games in the world, has seen its market value boom more than 700% over the past five years.

Since mid-April alone, its share price has really picked up the pace, hitting record high after record high and punching through the £50 barrier at one point. In total, Games Workshop has delivered shareholder returns in the region of a whopping 50.5% over the last 12 months. I also believe it has all the ingredients to keep impressing.

Make monster returns

There are very few companies which do what this FTSE 250 giant does. Through its vast network of shops Games Workshop has created a loyal community of customers who come to chat, paint and buy all-things Warhammer.

This dynamic allows it to thrive in spite of tough times for the retail sector. Just last week, it said sales for the last fiscal year jumped a handsome 16% to some £254m. And there’s plenty of reason, at least in this Fool’s opinion, to expect sales growth to remain impressive as it bolsters its store network to unite fantasy fans all over the world.

Games Workshop has always been expensive and remains so, the retailer currently sporting a forward P/E ratio of 23 times. I would consider it’s leading proposition in a niche market to warrant such a hefty premium, however, and I predict its global expansion programme will keep producing blowout shareholder gains.

Another wise buy?

Pets At Home Group (LSE: PETS) is another FTSE 250 share which has dealt out some seriously great returns over the past year. These have clocked in at astonishing 69.4%, chiefly because of its share price surge to 21-month highs above 200p per share.

I’ve long been cautious over the pet care specialist because of the toughening retail landscape and the price wars for pet food led by Britain’s supermarkets and online giant Amazon. But Pets At Home’s resilience is something to behold. Namely its ability to grab share-driving like-for-like revenues 5.7% higher in the last fiscal year and allowing it to return to profit quicker than it had anticipated.

Does it have the gumption to keep going? I’m not so sure. Retail conditions here are going from bad to worse. Latest research from the British Retail Consortium shows total sales in the UK in June were “the worst on record.” Needless to say, hopes of more splendid sales growth over at the animal superstore could be considered a little fragile.

A forward P/E ratio of 14.7 times for Pets At Home isn’t high, meaning the share price probably won’t slip off a cliff should sales growth begin to slow. I’m fearful, though, it will struggle to deliver anywhere near the sort of returns shareholders have enjoyed over the past year. And for this reason I’m happy to give it a miss today.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Dividend alert! 2 FTSE 250 income heroes I’m thinking of buying in July

Royston Wild — Mon, 24 Jun 2019 15:14:20 +0000

I haven’t got a lot of time to do it but Hays (LSE: HAS) is a share I’m thinking of buying ahead of the release of new financials slated for Tuesday, 16 July. There’s plenty of stocks out there that could plummet on fresh newsflow next month, but I reckon this recruitment giant is one that can thrive.

In my eyes it’s the perfect panacea for investors seeking to protect themselves against the short-term turbulence created by Brexit and the possible long-term economic implications should a no-deal European Union withdrawal come to fruition. Don’t underestimate the stunning progress this FTSE 250 firm is making on foreign shores is my message, in particular in Germany and in its so-called Rest Of World operations (which also exclude Australia and the UK).

A globe-trotting great

Collectively, these divisions account for 60% of group net fees, units in which like-for-like revenues rose 6% and 9% in the three months to March, respectively. In total, Hays saw fees rise in excess of 10% in more than half of the 33 countries in which it trades in that period too. It’s no wonder that City analysts are expecting another year of decent earnings growth for the 12 months to June (by 10% to be exact).

A recent share price spurt (+11% since the start of this month) leaves Hays trading at levels not seen since the autumn, and I reckon next month’s trading statement will embolden investor appetite still further. A forward P/E ratio of 12.9 times suggests the recruiter remains quite undervalued, however, and this gives additional space for fresh bouts of buying.

One other thing. At current prices, Hays also carries a prospective dividend yield of 6.1%, adding another feather to its cap.

Good for your ‘elf

I’m also considering loading up on some Games Workshop Group (LSE: GAW) shares before numbers for the fiscal year ended May are disclosed.

It really has been a quarter to remember for the FTSE 250 firm, a leading light in the field of miniature wargaming. Its share price is up by a staggering 55% in the second quarter thus far, helped by the release of another solid update in early June in which it declared that sales and profits kept on chugging higher — and across all channels, too — since it informed the market a couple of months earlier.

Was anyone expecting anything different, though? I’ve lauded Games Workshop’s dominant position in a specialised retail segment, and one which commands fiercely-loyal legions of fans the world over, giving it some excellent protection during tough economic conditions. The fantasy giant is expanding its global footprint at a rate of knots, unsurprisingly, setting it up for some serious profits growth in the years ahead too.

For the moment, Games Workshop’s expected to print a 6% earnings rise in fiscal 2020 and to raise dividends again, resulting in an inflation-stripping 3.2% yield. I don’t care about its high forward P/E ratio of 24.6 times. In my mind, it’s a brilliant long-term income play to snap up today.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

This FTSE 250 dividend stock is dealing around record highs! Can it keep rising?

Royston Wild — Mon, 22 Apr 2019 08:00:39 +0000

I’d like to bring your attention to Games Workshop Group (LSE: GAW), a dividend hero whose share price was recently registering just below all-time highs.

The fantasy game and model retailer barged through the £40 per share barrier in late September but had slipped, then stagnated, in the year to April 7. The Warhammer owner reminded the market just what it’s all about a week ago, though, with a scintillating trading update which has prompted its stock price to swell around 20% in just a week.

In it, the FTSE 250 business advised that trading has “continued well” following the release of half-year financials in January, with sales and profits in the period to April 7 ahead year-on-year. It added that the the signing of new licensing agreements had also pushed royalties above those of the prior period.

What truly sent Games Workshop’s share price spiralling higher, though, was news it’ll be paying a 35p per share dividend on the back of these strong results. Consequently, the total dividend for the 12 months to May is put at 155p per share, up from 126p in the previous fiscal year.

Dividends marching on

Games Workshop was recently trading just below autumn’s record highs, but can it keep going? I certainly believe so. While Brexit continues to cast a cloud over the wider UK high street, forecast-smashing retail sales data released yesterday has reduced some of the angst surrounding conditions in the company’s core marketplace and has provided some support to its investment case.

What really gets me excited in the long-term, though, are the steps that this niche retailer is making to build its multi-channel proposition in foreign territories. This includes expanding its global store network — the opening of a new Warhammer store in Hong Kong last year marked the company’s 500th shop — and boosting capacity at its Memphis warehouse to better serve its US customers.

In fact, I’m confident enough to say that even if broader retail-related data begins to disappoint again in the weeks and months ahead, that this won’t prove catastrophic for Games Workshop’s share price — after all, less that a quarter of group turnover is generated from British shoppers.

A model stock

It wasn’t a surprise to see City brokers upgrading their forecasts in the wake of last week’s update, and broker Edison for one expects earnings to rise 5% in the upcoming fiscal year (to May 2020) and that this will drive the dividend to 162p per share.

This projection yields a chubby 4.2%, but given Games Workshop’s lack of debt, the oodles of cash that it throws out, and its commitment to returning surplus readies to its shareholders, I believe this projection itself to be upgraded as the new year progresses. Now the firm’s forward P/E ratio of 18.8 times might not make it cheap, but this should prove no barrier to its share price marching ever higher in the months to come, in my opinion.

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£5k to invest? I would buy these market-beating FTSE 250 growth champions

Rupert Hargreaves — Tue, 19 Feb 2019 11:21:23 +0000

When high street baker Greggs (LSE: GRG) decided to launch a vegan sausage roll, I don’t think management realised how big of a success the new product would be.

Today, the group announced a 14% increase in sales for the first seven weeks of its 2019 financial year thanks, in part, to consumers’ demand for the company’s flagship vegan product.

Like-for-like sales in company-managed shops rose 9.6% in the first few weeks of its financial year, with total sales topped up by new store openings. Unfortunately, this growth boost is already running out of steam. The firm noted in today’s release that the rate of sales growth has already eased slightly in February.

Nevertheless, when you consider the fact that the rest of the high street is struggling, and analysts have been speculating for some time that Greggs’ growth has run its course, this expansion is extremely impressive and shows there’s plenty of life left in the business. That’s why I am recommending the company for your portfolio today.

Market-beating

Over the past decade, shares in Greggs have produced an average annualised return for investors of around 17%, that’s more than double the FTSE 250 average annual return over the same timeframe.

Some analysts had speculated that, after this considerable growth run, Greggs would struggle to repeat this performance. However, it seems the group still has plenty of tricks up its sleeve. City analysts had been expecting the enterprise to report earnings growth of less than 1% for 2018, and just 6.7% for 2019. But looking at today’s sales figures, it seems as if analysts will be going back to their spreadsheets over the next few weeks to rework their estimates, and there could be substantial revisions higher when the new projections are published.

With this being the case, I think it’s easy to justify the stock’s current valuation of 23.3 times forward earnings. Greggs isn’t a one trick pony. It’s shown over the past five years it can quickly adapt to changing consumer tastes, first with the introduction of new healthy products, and now with the vegan sausage roll. I think it’s worth paying a high valuation for such a unique and flexible business.

One-of-a-kind

Another one-of-a-kind business that I think is worth paying a premium for today is Games Workshop (LSE: GAW). Several years ago, analysts were prepared to write off this producer of fantasy miniatures. There was no way the group could compete with the rise of mobile phone games and games consoles, analysts argued.

As it turns out, the City was wrong about the business’s ability to reinvent itself and, over the past five years, the company has gone from strength to strength. Operating profit has nearly quadrupled since 2013 and investors have been well rewarded, with the stock up more than 500% since the end of February 2014.

I don’t see any reason why this trend is going to come to an end anytime soon. The company has a cash-rich balance sheet and generates an impressive operating margin of 33%, giving it plenty of firepower to invest in new products or reinvent itself, if needs be.

The stock is currently dealing at a forward P/E of 18.7, which seems appropriate considering the group’s impressive profit margins. There’s also a 3.8% dividend yield on offer.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Forget a cash ISA! This stock has turned £1k into £21k since 2009

Rupert Hargreaves — Tue, 15 Jan 2019 12:21:50 +0000

Cash ISAs can be an excellent tool for savers who are looking to shield their income from the tax man. However, as the best interest rate available for cash ISAs at the moment is less than 1.5%, it makes sense to look elsewhere for income.

Personally, my money is on high-quality growth stocks, companies that have a proven track record of creating value for investors, with a substantial competitive advantage and healthy profit margins. Games Workshop (LSE: GAW) ticks all of these boxes.

Outstanding track record

Games Workshop is an exceptional business. You might think that a company specialising in producing miniature figures for tabletop war games would have faded into obscurity over the past 10 years as computer games have taken over. But, thanks to its devoted fans, the group has not only managed to stay in business, but also grow at a rate many other retailers would kill to achieve.

Indeed, since 2013, revenue has grown at a compound annual rate of 10.3% as the company has rolled out new products. Thanks to a tight grip on costs and efficiency savings, profit margins since 2013 have more than doubled. As a result, net profit has grown at a compound annual rate of 29.6% since 2013.

This growth has translated into outstanding returns for investors. Over the past decade, shares in Games Workshop have returned just over 35% per annum, turning every £1,000 invested at the beginning of 2009 into £20,800 today.

Can the gains continue?

The question is, can the company continue on this trajectory? I think it’s highly probable. As noted above, the group has plenty of hardcore followers who provide a steady stream of income for the group. But at the same time, it’s also chasing new markets and management is always looking for ways to streamline the business.

Game Workshop’s figures for the six months to December 2 unveiled yet another record performance. Revenue jumped 14% year-on-year, and earnings per share increased 5%. Although these figures indicate growth is slowing, when taken in respect of the rest of the retail industry, it’s notable Games Workshop’s sales are still rising when many other retailers are struggling.

The increase in revenue is no doubt a result of growing customer numbers. According to today’s update, visitor numbers to its flagship Warhammer Community website increased 30% year-on-year to the beginning of December. Considering these figures, it’s no surprise that management is planning to upgrade its warehousing facilities in both Memphis and Nottingham near term, to help cope with growing demand and improve efficiency.

Time to buy

Put simply, I think Games Workshop looks highly attractive from an investment perspective.

The one problem I see with the stock at the moment is its valuation. The shares are trading at a forward P/E of 18.2, which is a bit more than I would like to pay for a retail business. That said, considering the group’s niche business, devoted customer base, and exceptional return on capital employed — a measure of profitability for every £1 invested in the business — of 87% for 2018, I think the shares do deserve a premium valuation.

As long as the company can continue to achieve double-digit sales growth (and I see no reason why it can’t) the stock should also continue to generate double-digit annual returns for shareholders for many years to come.

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Two stocks I’d buy to protect my portfolio in uncertain markets

Rupert Hargreaves — Fri, 07 Dec 2018 10:09:17 +0000

If you’re looking for stocks to protect your portfolio from uncertainty, I think you need look no further than gaming company Games Workshop (LSE: GAW).

It has a history of beating expectations and producing enormous returns for investors. Today, the company announced that for the first six months of the 2018/19 financial year (to December 2), the group is on track to generate sales of £124m and an operating profit of £41m. Even though there are still six months of the financial year to go, management believes these numbers are “in line with expectations for the year ending 2 June 2019.” According to my figures, these numbers indicate year-on-year sales and operating profit growth of 14%.

Management did not include its trading expectations for 2018/19 in today’s release, but the City is forecasting earnings per share (EPS) of 169p on sales of £235m. We still have the critical Christmas trading period to go, but looking at the numbers in today’s update, it seems to me that the firm is already on track to surpass City estimates for the full year.

Cash cow

On top of the steady growth, Games Workshop also has a policy of returning all excess cash to investors. Today, the group announced a distribution of 30p per share as part of this cash return policy. Analysts believe a full-year dividend of 120p is possible, based on the company’s projected profitability, suggesting a total dividend yield of 4%.

Overall, while the shares might not look cheap, changing hands at 17.8 times forward earnings, I think the company’s devoted customer base, steady growth and cash return policy is worth buying into in these uncertain markets.

Sausage roll champion

Another company that I believe won’t let you down in stormy markets is the country’s most loved sausage roll producer Greggs (LSE: GRG).

It has defied expectations over the past decade. Analysts had believed that the enterprise, which is best known for its sausage roll and pasty offer, would struggle to grow as consumers moved away from unhealthy food, towards lighter options. However, Greggs has adapted to the challenge and sales have continued to rise. What’s even more impressive is that the company has continued to expand during the high street’s recent problems.

Since 2012, net profit has expanded at a compound annual rate of 7.4%. It doesn’t look as if the company’s growth is going to slow down any time soon.

In a trading update published at the end of last month, Greggs announced that total sales expanded 9% for the eight weeks to 24 November, with like-for-like sales up 4.5%. Before this update, analysts had pencilled in a small decline in EPS for 2018, but following the upbeat statement, the City has rushed to update its numbers.

Having said all of the above, this is not a cheap stock. The shares are currently changing hands for 20.7 times forward earnings. Still, I think it is worth paying a premium to invest in this business as it has proven time and again that it can defy expectations and grow in a tough market.

The post Two stocks I’d buy to protect my portfolio in uncertain markets appeared first on The Twelfth Magpie.

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