Mercantile’s Guy Anderson picks Games Workshop as his one-share choice for the next decade

Guy Anderson, fund manager at Mercantile Investment Trust, said Games Workshop is the single stock he would hold for the next 10 years, citing the company's strong cash generation, loyal customer base and an emerging media pipeline that could broaden its audience.

Mercantile Investment Trust, which targets long-term capital growth by investing in medium and small companies, currently trades at a 9.8% discount to net asset value, offers a 3.2% dividend yield and charges 0.45% a year on market capitalisation with no performance fee. Its share price is up 4.75% year-to-date and about 33% compared with five years ago.

Anderson told This is Money that Games Workshop’s ownership of the Warhammer franchise and the company’s track record of consistent profits and reinvestment make it a credible long-term holding. "Over time it has delivered consistently strong profits and cash generation, which gives us real confidence in its ability to keep reinvesting and growing," he said. He noted Mercantile first invested in Games Workshop in 2017 and that the shares have returned about 1,200% for the trust’s investors since then.

For the next 12 months, Anderson identified online trading platform Plus500 as a particularly attractive prospect. He pointed to the company's growing customer base, strong profit generation, shareholder cash returns and plans to expand into the U.S. market. Anderson highlighted a structural feature of Plus500’s business: higher market volatility tends to increase trading volumes and therefore revenues for the platform.

Outside the U.K., Anderson singled out chipmaking giants ASML, TSMC and Samsung Electronics as companies with long-term structural demand driven by artificial intelligence, data centres and consumer electronics. "Demand for these technologies is not a short-term trend but something structural that will run for decades," he said.

Anderson said he views the U.K. market, particularly the mid-cap segment, as attractively valued. He noted the FTSE 250 currently trades at a discount to the FTSE 100, reversing a long-term pattern in which mid-caps commanded a premium. "In our portfolio we're finding more businesses we want to buy than to sell, which is often the best sign that value is there," Anderson said, adding that a more stable economic backdrop and lower interest rates could see mid and small caps outperform.

Mercantile’s top holdings include Cranswick and Bellway. Anderson described Cranswick, a leading U.K. food producer known for pork and poultry, as a long-term holding that benefits from heavy investment in capacity and automation, which has helped improve profitability amid rising labour costs. He said Cranswick shares have returned about 66% over the past five years. On Bellway, Anderson acknowledged a slowdown in the housing market but said the builder’s conservative balance sheet and track record in land buying positioned it to withstand cycles.

On strategy, Anderson emphasised a bottom-up, active approach to investing in mid and small caps. He argued active management is essential in this part of the market because it is less researched and more inefficient than larger cap segments, creating opportunities for stock pickers who meet management teams and scrutinise company fundamentals. Mercantile also uses gearing selectively, he said, to increase exposure when the managers have conviction.

Anderson said the trust takes a blended view on growth and value, preferring "quality businesses with improving outlooks that are trading at attractive valuations." He cited technology services companies such as Softcat and Computacenter as U.K. names that could benefit from AI-related spending even if they are not chip manufacturers.

On cryptocurrency, Anderson said he has watched bitcoin from the sidelines and does not hold it. He recommended Intermediate Capital Group as a pick for income-seeking investors, describing the alternative asset manager as having predictable fee-based cash flows that support reliable dividends and long-term growth.

Asked about his most successful and worst investments, Anderson pointed to 3i Group as a top performer. The trust first invested in 3i in 2013, and Anderson said the holding has delivered around a 30% annualised return for roughly the past 12–13 years, helped by holdings such as European discount retailer Action. He said his largest mistake was overexposure to U.K. domestic consumer names in 2022 as inflation and mortgage rates rose, a position that hurt performance and underlined the need for balance. He also cited swift exits from positions — Close Brothers after a car finance scandal and Watches of Switzerland after it missed growth targets — as examples of changing course when the investment case breaks down.

On public policy, Anderson said if he were chancellor he would prioritise tax and regulatory changes that support new home construction, arguing that building homes has a strong multiplier effect for wider economic growth.

Mercantile Investment Trust is co-managed by Anderson and Anthony Lynch and aims to find high-quality businesses at attractive valuations rather than making macroeconomic or sector calls. Anderson said the team is supported by J.P. Morgan’s research resources, which help in identifying companies that can outperform over time.