I’ve drawn up a list of top UK shares to buy via my Stocks and Shares ISA for next year. Games Workshop (LSE:GAW) sits somewhere near the top.
I opened a position in the FTSE 250 business at the end of 2020. And I added to my holdings earlier this year.
Games Workshop is best known for its Warhammer tabletop gaming systems. It makes and sells the building kits for the miniatures and the battlegrounds, along with the paints, the dice and other paraphernalia that bring its fantasy worlds to life.
Here I’ll explain what I think makes it such a brilliant long-term investment.
Larger than life
Games Workshop has spent decades developing its game systems and the lore surrounding them. Its what makes its merchandise so popular with fans of miniature wargaming.
Take the company’s Warhammer Age of Sigmar. In this, different factions (known as Grand Alliances) fight it out for supremacy of the so-called Mortal Realms. It’s a world packed with magic, combat, politics and larger-than-life characters.
The fantasy genre is big business. And the lore surrounding Games Workshop’s product has parallels with some of the world’s most popular cultural works.
Its characters and storylines remind me of the kind of content in JRR Tolkien’s Lord of the Rings book series, for example, or in landmark TV show Game of Thrones.
Big Amazon news
So I’m hugely encouraged by the company’s plans to increasing the licensing of its intellectual property (IP) to popular media. This could supercharge sales of its miniatures and game systems and create huge revenues in its own right.
Today Games Workshop announced that it has made an agreement in principle with Amazon “to develop [our] intellectual property into film and television productions.”
It added that rights to develop the company’s flagship Warhammer 40,000 universe will be the priority initially.
Contracts between the two parties are yet to be agreed. But the news still pushed Games Workshop’s share price 15% higher in Friday business.
In early 2021 the Total War: Warhammer III video game became the biggest-selling title on the Steam gaming platform. This illustrates the tremendous popularity of its own corner of the fantasy world.
A premium pick
Now, Games Workshop shares don’t come cheap. Today’s surge mean the business trades on a forward price-to-earnings (P/E) ratio of 21.6 times.
But some shares deserve premium ratings. And Games Workshop is up there in my opinion.
It’s the market leader in what is a fast-growing global hobby. And the steps it’s taking to popularise its IP could take profits to the next level.
Besides, a decent 2.9% dividend yield helps to take the edge off that chunky P/E ratio. The rise of 3D printing poses a threat to the business. But I still think the fantasy giant is a terrific buy for the New Year.
