Would Warren Buffett approve of this stock I’ve just bought?

After adding to his position in this FTSE 250 constituent, this Fool explores whether it’s a stock that Warren Buffett could be a fan of.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Fans of Warren Buffett taking his photo

Image source: The Motley Fool

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I recently added to my position in Games Workshop (LSE: GAW) and I wondered if one of the greatest ever stock pickers, Warren Buffett, would approve of my decision.

While unfortunately, I’ll never get the opportunity to ask him directly, I think it may be a stock that he would be a fan of. Let me explain why.

A strong advantage

There are multiple reasons why I think this. The business operates in the miniature wargames industry. In the space, it’s the front runner by a clear margin. Buffett tends to target companies with a moat. Games Workshop certainly has that.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Over the past decade, that has given it a major advantage to continue growing and put it in a strong position to keep delivering in the times ahead. Over the last five years, it has averaged nearly 17% revenue growth each year.

What’s more, it has plenty of cash to hand and zero debt on its books. That bodes well for future growth prospects.

A solid business

Buffett also promotes buying businesses over stocks. He says investors shouldn’t purchase shares just because they believe they’ll rise. Instead, we should buy businesses we understand, and that we think can thrive over the long run.

It’s a method that has worked for him. His company, Berkshire Hathaway, has produced returns of 20% on average, double the S&P 500.

That’s another reason why I like the FTSE 250 stalwart. Despite its recent success, it’s not slowing down. Lately, it has been looking to expand its licensing business.

The biggest move it has made is its deal with Amazon, which will see its Warhammer franchise turned into a string of TV and film content.

Making extra money

Buffett once famously said: “If you don’t find a way to make money while you sleep, you’ll work until you die.” Therefore, I’m pretty certain he’d be a fan of Game Workshop’s 4.3% dividend yield.

Buffett owns many stocks that reward shareholders with dividend payments. Last year, he received a reported $776m from his Coca-Cola holding alone. As such, I’ve made a conscious effort to focus on buying stocks that will earn me passive income.

I especially like Games Workshop as it uses only “truly surplus cash” to pay shareholders. Dividends are never guaranteed. Therefore, this, coupled with its impressive track record of rising dividends over the last decade, gives me confidence that its payout will be sustained going forward. 

The issues

Of course, aside from the obvious issue that Buffett doesn’t invest in UK companies, there are a few other reasons why he and other investors might be deterred from snapping up Games Workshop.

The stock looks expensive. It currently trades on 23.2 times earnings, above the FTSE 250 average of around 12.

What’s more, it’s prone to a downturn in spending, especially if inflation rises again and eats away at consumers’ pockets. We saw its share price take a hit at times last year after sales slowed.

A top-quality business

But Buffett has advocated before that he’s happy to pay the price for quality. And I think Games Workshop is one of the finest businesses on the Footsie.

Although I’ve recently increased my position, I’ll be looking to top up again soon with any investable cash I have.  

This AI stock is becoming a digital juggernaut in a £ 12.5 billion market!

🤖 Curious about the next big player in AI? 🤖

Our leading industry analysts have uncovered a trailblazing content platform that's revolutionising the industry with its unparalleled generative AI technology, setting new standards in creativity and efficiency.

Care for a sneak peek?

Trusted by global giants like Amazon, Disney, and Netflix, this innovative company is not just transforming digital media with AI-generated 3D content but is also capturing a significant share of a £12.7 billion market!

With a remarkable 62% gross margin, indicating exceptional profitability and operational efficiency, this company's growth trajectory positions it as a must-watch for savvy investors.

Best of all, we're offering exclusive access to the name of this game-changing stock, absolutely free!

Discover your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charlie Keough has positions in Games Workshop Group Plc. The Motley Fool UK has recommended Amazon and Games Workshop Group Plc. 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.

More on Investing Articles

Investing Articles

At a 52-week low but forecast to rise 73%! Is this growth share the FTSE’s top recovery play? 

This FTSE 100 growth share has taken an absolute beating over the past two years but Harvey Jones says the…

Read more »

Investing Articles

This FTSE 250 share offers a juicy 9.8% yield. Will it last?

This well-known FTSE 250 share has a percentage dividend yield approaching double digits. Should Christopher Ruane add the income share…

Read more »

Investing Articles

Is a £333,000 portfolio enough to retire and live off passive income?

A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Here’s why Nvidia stock fell 13% in March

The Nvidia stock price rise was looking unstoppable. Should investors now be wondering if the same might be true of…

Read more »

US Stock

It’s ISA deadline week! Here’s my 3-step game plan

Jon Smith tries to calm the hype around the last minute ISA rush to buy stocks and explains why he's…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

£10,000 invested in BAE Systems shares at Christmas is now worth…

BAE Systems shares have been surging in the FTSE 100 in 2025, driven higher by the wavering US commitment to…

Read more »

Investing Articles

Up 19% in 2 weeks, can the Tesla share price rebound further?

Tesla's first-quarter delivery numbers came out today. Will they help persuade our writer to invest his money at the current…

Read more »