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I have been looking for shares to buy for my portfolio this summer. While the FTSE 100 index of leading UK shares has been performing strongly, that does not mean there are not still some potential bargains nestling within – or beyond.
So I have made some purchases over the past month – but I am also eyeing some more possible additions to my portfolio, which I am ready to snap up if their share prices get to a level I see as good value.
Games Workshop
Should I, or not? I have a continual dilemma with Games Workshop (LSE: GAW). The business tempts me, but the share price always looks a little costly for my tastes.
Then it moves up again and I wonder am I missing something and sitting on the sidelines unnecessarily?
The Games Workshop share price is already up 19% so far this year. Over five years, it has grown 67%, while over the past decade it is up 2,692%.
That hurts, because well over a decade ago I knew people who reckoned it looked like a great share to buy, thanks to its proprietary intellectual property, large fan base and highly profitable business model. That is all still true. Last year, for example, net profit was up 32%.
But, like a decade ago, the share price is too expensive for my tastes. The current price-to-earnings (P/E) ratio of 29 is expensive, I reckon. That is around a third higher than I would be willing to pay.
After all, I fear an economic downturn could eat into demand for the sorts of expensive role-playing products Games Workshop sells.
So for now, I am holding back. But I am keeping an eye on Games Workshop and, if it comes down in price enough, it is one of the shares I would look to buy.
British American Tobacco
I have owned British American Tobacco (LSE: BATS) shares before, primarily for their passive income potential. The 5.7% yield far exceeds the FTSE 100 average of 3.3%. On top of that, the Lucky Strike maker has raised its dividend per share annually since the last century.
But while my eyes are on dividend potential, lately the share has been even more notable for its price action. It is 51% higher now than a year ago.
I was primed to buy at £30 in May, but while the share price almost reached that level, it started rising again shortly before it got there. So I missed the 40% share price gain in just under three months.
The current price is higher than I would like to pay. I reckon British American’s strong premium brand portfolio and highly cash generative business are attractive. But a large debt pile and declining cigarette sales volumes are both threats to future profitability. Cigarette volumes declined 9% year-on-year in the first half.
For now then, I am sitting on my hands. If the share price hits £30 again though, British American Tobacco is on my list of shares to buy.
