UK markets closed
  • NIKKEI 225

    29,291.01
    -150.29 (-0.51%)
     
  • HANG SENG

    28,436.84
    -201.69 (-0.70%)
     
  • CRUDE OIL

    71.80
    -0.32 (-0.44%)
     
  • GOLD FUTURES

    1,820.60
    -35.80 (-1.93%)
     
  • DOW

    34,033.67
    -265.66 (-0.77%)
     
  • BTC-GBP

    27,679.84
    -1,049.15 (-3.65%)
     
  • CMC Crypto 200

    960.04
    -32.43 (-3.27%)
     
  • ^IXIC

    14,039.68
    -33.17 (-0.24%)
     
  • ^FTAS

    4,088.47
    +5.27 (+0.13%)
     

I just bought this UK share in my Stocks and Shares ISA! Here’s why

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3-min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Risk appetite is picking up strongly again across UK share markets. The FTSE 100 is moving further above the 7,000-point landmark to fresh 15-month highs whilst the FTSE 250 has also charged to new all-time peaks. I myself have been busy buying British stocks for my Stocks and Shares ISA in recent days too.

The rate at which the video games market has been growing recently (and indeed is tipped to expand by in the next several years) has caught my attention. So I decided to take the plunge by investing in Keywords Studios (LSE: KWS). This tech company provides a range of creative, technical and marketing services to some of the world’s biggest software manufacturers.

Sales at Keywords Studios soar

Revenues at Keywords rose 14.4% year on year in 2020. This was driven in large part by Covid-19 lockdowns that in turn prompted huge increases in the number of video game players and gameplay levels in general. I think the company can expect extra top-line progress from 2021 onwards too. As analyst Nicholas Hyett of Hargreaves Lansdown comments: “[Last year’s] trends look set to continue into 2021 even if pandemic disruption subsides. The launch of the next generation of consoles, the PlayStation 5 and Xbox X/S, mean a batch of new games to work on while studios are expected to up new content production as they look to hold on to new gamers acquired over the pandemic.”

A still from Activision game "Call of Duty: Black Ops Cold War"
A still from Activision game "Call of Duty: Black Ops Cold War"

A better UK gaming share?

This tech stock isn’t the only way that UK share investors can exploit the booming video game market. Indeed, I was thinking of adding game developers Frontier Developments or Team17 to my ISA instead. But Keywords has one big advantage over these particular stocks. As an outsourced supplier, its profits aren’t dependent upon the success of individual games titles. Launches can flop for a variety of reasons, from technical problems and poor reviews to intense competition. Keywords Studios saves its shareholders from such worries.

Hyett of Hargreaves Lansdown has made an interesting analogy about Keywords on this front. He comments that “it’s often said that during the California gold rush the big winners weren’t the miners themselves, but those that sold the equipment needed to dig. Given the rapid growth in gaming we see Keywords as a purveyor of pickaxes in a digital gold rush.”

A top ISA buy

Like any UK share though, there’s no guarantee that Keywords will make me big returns. Games development is naturally complex, and any unexpected technical problems the company runs into can result in serious reputational damage that could affect future business. This would be particularly damaging if it resulted in revenues-smacking launch delays for a developer.

That being said, I’m still backing Keywords to make me some good ISA profits over the long term. I like its strong relationships with software developers that should allow it to exploit the booming gaming industry to the fullest. A string of recent acquisitions to boost key areas could improve its custom from games studios too.

The post I just bought this UK share in my Stocks and Shares ISA! Here’s why appeared first on The Motley Fool UK.

More reading

Royston Wild owns shares of Keywords Studios. The Motley Fool UK has recommended Frontier Developments, Hargreaves Lansdown, and Keywords Studios. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021