Image source: Games Workshop plc
As a fully signed-up Fool, I aim to hold stocks for the long term. But there have been occasions over the years where I’ve sold up, banked some lovely profit and moved on. However, I’m now thinking of re-introducing a couple of FTSE stocks into my portfolio.
On form
I made good money from jettisoning my Games Workshop (LSE: GAW) holding a while ago. The problem is that the shares kept going up in value ever since! As frustrating as this is, the rich run of form looks to have been completely justified.
Games Workshop just keeps on growing. For evidence, check out the owner of Warhammer’s latest trading update, released on 23 May. Core revenue for the year to the start of June is expected to be “not less than £560m“. Meanwhile, pre-tax profit should come in at “not less than £255m“. The latter would represent a near-26% jump on the previous year.
Interestingly, the shares fell on the day. This may be due to the company stating that licencing revenue — while being at a record level — probably won’t be repeated in 2025/26.
Punchy valuation
This movement underlines the ‘problem’ that comes with investing in great companies. When expectations are already high, any minor disappointment can have an impact.
It’s worth bearing this in mind given that Games Workshop now trades at a price-to-earnings (P/E) ratio of 30 for FY26 (beginning in June). That’s punchy compared to the general market, let alone among consumer cyclicals stocks. This is especially if the threat of US tariffs continues to play on investors’ minds.
Then again, investors should expect to pay more for a business like this with its incredible quality metrics and strong balance sheet.
Having already grown by 15% this year, there may be more profit-taking to come. But that could be a great time to dip my toe back in.
Horror show
My decision to offload FTSE 250 member Greggs (LSE: GRG) when the shares breached the 3,000p boundary last autumn has worked out far better. At the time, I was concerned about the price tag. A P/E of nearly 30 seemed too rich for what was/is… actually a simple, albeit superb business that was about to be hit by new tax rises.
Since then, we know that investors have endured a torrid time. Slowing sales growth and bad weather have hammered sentiment. Shares have been pushed down to levels not seen since UK inflation peaked in 2012.
Now cheap?
There’s an argument that this poor form could continue if household bills keep rising and consumer confidence stays lower for longer.
Then again, things have felt a bit more positive lately. Greggs just reported that like-for-like sales climbed 2.9% in the first 20 weeks of the year. This compares favourably to just 1.7% in the first nine weeks.
A far-more-reasonable P/E of 15 probably gives me a decent margin of safety if I were to buy back in. The dividend yield currently stands at 3.3% too. That’s average for the index but at least I’d be getting some money coming in if the shares drift sideways from here.
The £2.1bn-cap’s sticky patch may be coming to an end and I’m ready for it. I’m considering both.
