With growth shares taking off again as interest rates fall, some tremendous returns have already been unlocked in 2024. Yet despite the upward trajectory of these businesses, plenty are still trading at relatively cheap valuations compared to their 2025 growth potential.
With further rate cuts just around the corner and the UK economy heating up again, time may be running out to snap up some terrific growth opportunities at the current lower price. That’s why I’ve already been topping up several of my positions, including Games Workshop (LSE:GAW) and Alpha Group International (LSE:ALPH).
2025: the ‘Year of Chaos’
Activity in the Warhammer: 40,000 universe is heating up. Games Workshop has a long list of new miniatures and army books set to be released throughout 2025. In particular, the highly popular Chaos factions will finally be getting their long-anticipated miniature revamps for 10th Edition. That’s why management’s dubbed 2025 as the ‘Year of Chaos’.
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Pairing this with the upcoming releases of the new Astra Militarum and Eldar miniatures in the first quarter, Games Workshop’s impressive growth doesn’t appear to be slowing.
We’ve already had a taste of how new miniatures can spark growth. In the firm’s latest trading update, management confirmed sales are ahead of expectations. This is likely due to the high demand for the Christmas Battleforce box sets that recently started accepting pre-orders. As such, pre-tax profits for the six months leading to December are now on track to reach a minimum of £120m versus £96.1m a year ago.
Suppose the same level of demand’s generated for the new upcoming Chaos miniatures? In that case, this 25% earnings growth may be just the tip of the iceberg.
Of course, explosive earnings aren’t guaranteed. Not all new miniatures released in 2024 were met with enthusiasm, with the Blood Angels and Adepta Sororitas factions receiving a pretty lukewarm reception. Therefore, if the new miniatures don’t live up to the hype for hobbyists, growth could slow, sending the share price in the wrong direction.
Nevertheless, with more hits than misses under its belt, I think this is a risk worth taking. That’s why Games Workshop’s on my top ‘shares to buy’ list, and I’ve already added more to my portfolio.
Alternative fintech
2024 has been a good year for financial service businesses. Banking has been among the top-performing sectors, and even Alpha Group International has benefited from the momentum, with shares rising 25% since January. Yet, in recent months, the shares have taken a bit of a tumble, falling by almost 15% since August.
Stable currency exchange rates and higher interest rates have been creating a few hurdles for the fintech enterprise. Demand for currency hedging’s fallen. And lacklustre returns in the alternative investment market (private equity, private credit, venture capital, and real estate) are also dragging down growth for the company’s banking platform for alternative asset managers.
However, despite these headwinds, the group’s client list continues to grow. And with activity expected to start picking back up throughout 2025 as interest rates fall, investors may be looking at an interesting buying opportunity.
Cyclicality will always be a threat. But with the bottom of the cycle seemingly almost over, the firm may soon be returning to its historical double-digit growth. That’s why it’s one of my largest holdings.
