In my investment portfolio, there are a few growth stocks that are not just investments but integral parts of my long-term strategy. Two of these stocks stand out as crucial additions, each holding a special place in my investment journey.
- Games Workshop
Among the stocks that I hold dear is Games Workshop (LSE: GAW), the mastermind behind iconic tabletop wargames such as Warhammer 40,000 and Warhammer Age of Sigmar. This FTSE 250 company doesn’t just create games and miniature figures but also rakes in revenue from books and video games through licensing deals. With 78% of its sales coming from international markets, Games Workshop has built a loyal customer base of lifelong hobbyists.
The stock has seen an impressive surge of 1,675% over the last decade, excluding dividends. Currently boasting a dividend yield of 3.6%, Games Workshop continues to be a strong contender in the growth stock category.
What sets Games Workshop apart is its dominance in a profitable niche market, allowing it to wield strong pricing power. With a remarkable operating margin of 38% and an exceptional return on capital employed averaging around 62%, the company has proven its profitability over the years. In the latest fiscal year, Games Workshop achieved record-breaking sales, profits, and dividends, while also striking deals with Amazon for Warhammer film and TV adaptations.
Despite the high valuation at 22 times forecast earnings and potential risks in a US market downturn, Games Workshop remains a solid choice for long-term investments, in my perspective.
- Axon Enterprise
The second stock that I envision holding indefinitely is Axon Enterprise (NASDAQ: AXON). Over the past decade, Axon has seen an astounding 2,290% growth in its stock price.
Although currently trading at a lofty valuation of 76 times forecast earnings, a sign that the market may have already priced in much of its anticipated growth, Axon’s high-growth business model remains formidable. Specializing in body and vehicle cameras, TASER devices, and cloud-based evidence management software, Axon offers a comprehensive ecosystem that delivers high customer retention due to the integration of its products.
The seamless coordination between Axon’s products not only creates high switching costs for law enforcement agencies but also enhances accountability with features like automated syncing of TASERs and bodycams. With a substantial customer base totaling over 17,000 and a robust net revenue retention of 122%, Axon’s recurring revenue stream is both stable and promising.
Despite the risk of data breaches and the potential intensification of competition, Axon’s innovative AI service, Draft One, has received overwhelming positive feedback for enhancing productivity for law enforcement agencies. With a forward-thinking approach to technological advancements, Axon is well-positioned to introduce more innovative solutions in the near future.
In conclusion, Games Workshop and Axon Enterprise stand as pillars in my investment strategy, representing the core of my long-term investment horizon. Both companies exhibit strong growth prospects and innovative business models that underscore their potential for sustained success in the years to come.
