Thursday, February 29, 2024

2 growth stocks for the next 10 years and beyond

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Growth is good. Growth stocks offer substantially higher growth rates than the average for the market. If a company is growing fast, then over time its earnings should increase and so should its stock price. Here are two growth stocks that I plan to hold in my portfolio for the next decade and beyond.

Renewable energy stock

The Renewables Infrastructure Group (LSE: TRIG) invests in onshore and offshore wind and solar farms in the UK and Europe. This trust first listed around a decade ago. It has grown its renewable energy generating asset base to around £3.7bn since then. The UK and EU are keen to increase the amount of renewable power generating capacity for decarbonising and security reasons. There is scope for TRIG to continue to grow its asset base even more over the next 10 years.

If this trust can increase its net asset value (NAV) per share over the next decade, then Its share price should follow as the two usually move in tandem. But right now TRIG shares are trading at a 5% discount to NAV. I think that makes a good entry point. But it could also reflect investor concerns about energy caps and windfall taxes, rising rates, and cooling energy price inflation.

These are valid concerns. TRIG uses a revolving credit facility to purchase assets and then pays down the debt with equity raises. Higher rates makes this more expensive. Income is tied to inflation. But, the trust has delivered without rampant inflation in the past. Rates are expected to come down. Over the next decade, I think TRIG will continue to drive its NAV higher and its share price too, so I’m keeping hold of it.

Tabletop growth stock

Games Workshop (LSE: GAW) and its Warhammer franchise has delivered 21% sales and 33% earnings-per-share annual growth on average over the last five years. That is significantly better than the market average. And the company has an impressive management team with a long-term strategy that has always been clear and consistent:

  • Continue to develop its Warhammer intellectual property, and make the hobby based around it and the business better and better
  • Make the best fantasy and sci-fi tabletop gaming products in the world
  • Explore licensing agreements outside the core business for its intellectual property (IP)

Games Workshop struck a deal with Amazon to make TV shows, movies, and merchandise from its Warhammer IP, and long-time Warhammer enthusiast Henry Cavill is set to star. That’s the sort of tie-up that should drive licensing revenues higher for years to come.

Of course there is no guarantee that bringing a fantasy or sci-if setting to the big (or small) screen will work as expected. Amazon and Netflix know this. A bad adaptation would not bring many new fans Games Workshops way and possibly annoy its core fan base. But I think the Amazon tie-up is an exciting prospect regardless.

It should make Games Workshop’s long-standing goal of getting a true triple A Warhammer video game developed by a major studio easier to attain. That and, whatever Amazon produces, should boost license revenue over the next 10 years and boost demand for the company’s core business products and services. That’s why I plan to keep Games Workshop in my Stocks and Shares ISA for the next decade.

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