Mercantile Trust manager names Games Workshop his one stock for the next decade, backs Plus500 for 12 months

Guy Anderson, co-manager of the Mercantile Investment Trust, said Games Workshop is the one stock he would hold for the next decade, citing the miniature maker’s strong cash generation, global brand and new media opportunities. For the coming 12 months he singled out online trading platform Plus500 for its robust economics and potential growth from expansion into the United States.

Anderson, who runs the trust alongside Anthony Lynch, said Games Workshop’s ownership of the Warhammer universe and a recent deal with Amazon to bring Warhammer stories to film and television give confidence in the franchise’s long-term reach. The trust first invested in Games Workshop in 2017; Anderson said the shares have delivered roughly 1,200 percent for Mercantile’s investors since then.

The Mercantile Investment Trust aims for long-term capital growth by investing in medium- and small-sized companies, most listed on the London Stock Exchange. The trust currently trades at a 9.8 percent discount to net asset value, offers a 3.2 percent dividend yield and charges a total annual management fee of 0.45 percent on market capitalisation with no performance fee. Its share price is up 4.75 percent year to date and about 33 percent over five years.

Anderson described Plus500 as a strong nearer-term opportunity because its business model benefits from market volatility, which drives trading volumes. The company has grown its customer base, generated strong profits and returned cash to shareholders, he said, and its US expansion could open a materially larger market.

Beyond the UK, Anderson highlighted chipmaking giants ASML, Taiwan Semiconductor Manufacturing Co. and Samsung Electronics as companies likely to benefit from long-term structural demand for advanced semiconductors used in artificial intelligence, data centres and consumer electronics.

On the domestic market, Anderson said the UK appears attractively priced, especially in mid-cap names. He noted that the FTSE 250 currently trades at about a 5 percent discount to the FTSE 100, reversing historical norms in which mid-caps often carried a premium and outperformed over extended periods. "We're finding more businesses we want to buy than to sell," he said, adding that improving stability and lower interest rates could lift mid and small caps.

Cranswick is among Mercantile’s top holdings because, Anderson said, the food producer has invested in capacity and automation that supports margin improvement and expansion. The shares have returned about 66 percent over the past five years, evidence of resilience amid industry pressures, he added. Bellway is another holding; Anderson described the housebuilder as conservatively financed and well positioned to weather a slower housing market due to land-buying discipline and outlet expansion.

Anderson rejects a rigid growth-versus-value framework and instead looks for high-quality businesses with improving outlooks available at attractive valuations. He argued active management is essential in UK mid and small caps because those segments are less researched and more inefficient, creating opportunities for stock pickers who can meet management teams, scrutinise finances and use bottom-up analysis. The trust also has the flexibility to use gearing to increase exposure when conviction is high, he said.

As for technology, Anderson declined to point to a single UK company as the "next Nvidia," but flagged resellers and services businesses such as Softcat and Computacenter as firms positioned to benefit from rising corporate IT and cloud spending tied to AI adoption. He said that while chips are central to the AI boom, peripheral infrastructure and services will capture significant capital expenditure.

Anderson said he has observed bitcoin from the sidelines and does not personally invest in the cryptocurrency. For an income-focused investor seeking a long-term dividend payer, he recommended Intermediate Capital Group, an alternative asset manager whose recurring fee base supports predictable cash flows and dividends; the trust has held the stock for more than a decade.

Reflecting on past errors, Anderson said Mercantile was overly exposed to UK domestic consumer names in 2022, just as inflation and mortgage rates rose, which harmed performance. The trust also exited positions when the investment cases deteriorated, citing Close Brothers’ involvement in a car finance scandal and Watches of Switzerland missing growth targets. "When the facts change, you have to change with them," he said, summarising the lesson.

Anderson named 3i Group as his best investment, saying the private equity business has produced roughly a 30 percent annualised return since Mercantile invested in 2013, driven in part by holdings such as European discount retailer Action and its rapid store roll-out.

He also advised tax measures that would stimulate growth, saying policy that supports new home construction — including cuts in taxes and some regulations that constrain supply — could deliver broad economic benefits by creating jobs and supporting wider supply chains.

Mercantile’s approach remains bottom-up, focusing on company quality and valuation rather than making macro calls. Anderson said that with more opportunities in the UK mid- and small-cap space than recently, the trust is inclined to add to holdings rather than reduce exposure, a stance that reflects his view that valuations currently favour patient, selective investors in the segment.