Today is 14 February, so FTSE 250 stock Games Workshop (LSE: GAW) might not be the first thing on people’s minds.
After all, the company’s Warhammer 40K franchise centres on a fictional universe embroiled in a never-ending war. This is a grim setting, involving alien races and demonic entities, where the survival of humanity hangs in the balance. It’s a far cry from Barry White and candles!
Yet this is my favourite UK stock, one which I’ve held tightly for many moons.
Here then, I write my open love letter to it.
A Fool for love
Dear Games Workshop shares,
To start, I have a shocking confession to make: you haven’t always been my ultimate fantasy figure. Indeed, when I first encountered you years ago, I’m afraid you didn’t really catch my eye. I looked at you out there on the high street and thought you were too niche and, dare I say, old-fashioned. Even a tad – gulp – boring.
However, that soon changed once I got to know you. Underneath that somewhat geeky exterior, you were – and remain – an exceptionally attractive multichannel business.
Your 39% free cash flow margin is otherworldly. And because of this, you have been very generous, giving me as much in dividends as you can afford, in both good times and bad times. Such generosity fills my heart with joy.
Unfortunately, some worry about the sustainability of these profits and accuse you of overseeing an increasingly high-maintenance hobby. Admittedly, your plastic doesn’t come cheap.
This doesn’t worry me unduly because you continue to inspire loyalty from your devoted fans. As such, you have no real competition. I just don’t see anyone coming along to steal your tabletop wargame crown. You truly are in a league of your own, although I’m still keeping an eye on your risks.
Wine, dine and Amazon Prime
Another thing I value is how picky – some may even say prudish — you have been with your intellectual property. You don’t licence it out to any old Tom, Dick and Harry. You guard it to protect its reputation.
Therefore, it may surprise you to learn that I’m more than happy to see you jumping into bed with Amazon to make films together, especially as it involves the actor Henry Cavill (another long-time admirer of your products).
I think this will be a very fruitful additional relationship that should bring you in even more fans and money. I’m on board with that.
A rosy future
Looking ahead, I think you’re destined for a promotion to the FTSE 100 some day. Of course, this could raise your profile further and make you more sought after. At a valuation of 23 times earnings, you are already highly-priced, as your critics never tire of pointing out. I get that.
Granted, you may be expensive, but I’d argue real quality is. High standards (and margins) deserve a premium.
During our time together, I’ve always been faithful and have never sold you out. Although I admit that I have frequently had my head turned by some of those scorching-hot US stocks. And yet here I am, still loyal to you.
Nearing 50 years old, you remain as creative and ambitious as ever. So I can see myself being committed to you for a very long time, potentially forever.
All my love.
Ben
