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Prudential

What it does: Prudential is a life insurance and asset management company operating solely in Asia and Africa.

By Andrew Mackie: Following the spin-off of its UK and US businesses, Prudential (LSE: PRU) is now focused entirely on some of the world’s fastest growing markets. This makes complete sense when one considers its growth drivers. Across Asia, for example, despite rising levels of prosperity, insurance penetration is still extremely low. This market is estimated to be worth $1.8trn.

What I particularly like about Prudential is that it is diversified across geography, channel and product. Not only does this provide it with multiple sources of growth but also adds resilience to its business performance. Its distribution network encompasses over 500,000 licensed agents as well as through partnerships with banks (known as bancassurance).

Prudential’s share price has come under severe pressure throughout 2022. It is down 30% year to date. This has been primarily driven by the ongoing closure of the border between Hong Kong and Mainland China. This has hit revenues in its largest market. However, when one considers the explosive growth potential across several of the regions it operates in, today’s depressed share price offers investors an attractive entry point.

Andrew Mackie owns shares in Prudential.

Games Workshop

What it does: Games Workshop designs, manufactures, and sells fantasy miniatures for its Warhammer tabletop gaming experience.

By Zaven Boyrazian. Games Workshop (LSE:GAW) is arguably one of the world’s most recognised tabletop gaming companies. This is the group behind the immensely popular Warhammer franchises, generating the bulk of its revenue through selling miniatures to hobbyists through its global network of retail partners.

Over the last 12 months, the share price hasn’t been the best performer, dropping by over 40%. It seems investors are growing increasingly pessimistic about the short-term performance of this consumer discretionary business. And the latest trading update did show some shrinkage in profits, as consumer spending takes a hit from the cost-of-living crisis.

However, this drag on earnings ultimately stems from a short-term problem. And with the group’s long-term strategy still intact, backed up by an impressive cash war chest of £71m, I can’t help but see the recent share-price drop as a buying opportunity for my portfolio.

Zaven Boyrazian does not own shares in Games Workshop.

Smurfit Kappa Group 

What it does: Smurfit Kappa manufactures packaging products for e-tailers, supermarkets, consumers and industrial customers. 

By Royston Wild. A slew of positive trading updates from the packaging sector would encourage me to buy Smurfit Kappa Group (LSE: SKG) shares for November. 

The FTSE 100 business released financials of its own on Wednesday, 2 November. I think this could help it to record further healthy share-price gains across the month, and beyond. 

Industry rival Mondi reported a 55% rise in underlying EBITDA in the third quarter, it reported in October. It commented that “higher average selling prices and overall volume growth more than offset significant cost pressures.” 

Shortly before this, DS Smith announced that it expected “very strong” revenues growth in the six months to October. Trading was so strong in fact that the firm lifted its half-year profits forecasts. 

Smurfit Kappa’s cheap share price certainly leaves scope for fresh gains if its own financials impress. The packaging powerhouse trades on a forward price-to-earnings (P/E) ratio of just 7 times. 

Royston Wild own shares in DS Smith. 

AstraZeneca

What it does: AstraZeneca is a biopharmaceutical company that develops medicines used by millions of patients worldwide.

By Charlie Carman. AstraZeneca (LSE: AZN) has been a top FTSE 100 performer for a decade. An anticipated return to pre-Covid levels of cancer diagnostics should boost sales for the healthcare heavyweight’s range of oncology products, including Tagrisso, Lynparza, and Imfinzi.

Indeed, AstraZeneca is well positioned for an ongoing transformation in global demographics. Demand for pharmaceuticals to treat chronic diseases continues to rise, and the World Health Organisation predicts one in six people will be aged over 60 by 2030.

Disappointingly, the business suffered a recent setback in a trial for a nasal spray version of its Covid-19 vaccine. Initial testing revealed it didn’t provide adequate protection in humans. However, there’s more to the company’s drugs portfolio than coronavirus treatments, and I think growth prospects look bright elsewhere.

AstraZeneca’s share price has fallen nearly 15% since reaching a 52-week high in August. I believe this presents an attractive buying opportunity to increase the position in my shares.

Charlie Carman owns shares in AstraZeneca. 

Persimmon

What it does: Persimmon builds houses. And when prices are right, it builds up its land bank to build even more houses on.

By Alan Oscroft. The long-term argument for investing in Persimmon (LSE: PSN) is, I think, straightforward. The UK is in the grip of a chronic housing shortage. And our listed housebuilders enjoy strong barriers to entry.

The short-term argument against buying now is the economy, and the growing fears of house price weakness. After all, the Persimmon share price has fallen 50% over the past 12 months, and we don’t want any of that, do we?

Well, actually, I remember the previous housebuilder slump, and I noticed Persimmon was buying up building land when it was cheap. And after that, the shares entered a long and strong bull run. So what’s happening now? Persimmon has been buying up land again.

But the bottom line for me is a P/E ratio of only about five, and a 19% forecast dividend yield. The short-term risks are real, but I think Persimmon is oversold.

Alan Oscroft owns Persimmon shares.

Renishaw

What it does: Renishaw designs and manufactures high-precision measuring equipment and healthcare technology.

By Stephen Wright. I’ve gone for FTSE 250 stock Renishaw (LSE:RSW) as my best British shares to buy in November. This is a business that’s growing, is well protected, and has a strong balance sheet.

Renishaw makes specialist equipment, which it sells to various end markets, including agriculture, healthcare, and power generation. The company has over 1,800 patents protecting its products. 

The company’s balance sheet also looks sound to me. Renishaw has £16.25m in total debt and £141m in cash, which means that I don’t think it’s in much danger with interest rates rising.

Earnings have been growing at an average of 6% annually over the last decade. But the stock has fallen by almost 30% since the start of the year and is now trading at a P/E ratio of 21. 

Stephen Wright does not own shares in Renishaw.

Taylor Wimpey

What it does: Taylor Wimpey is one of the UK’s largest housebuilders, selling homes to private customers and local housing associations

By Paul Summers. The share prices of UK housebuilders have come under serious pressure in 2022 over concerns that rapidly rising interest rates and a protracted recession will dampen demand. Taylor Wimpey (LSE: TW) has been one of the biggest casualties, losing half its value since the beginning of the year.

This may be an opportunity for long-term-focused Fools like me. The FTSE 100 firm is clearly in far better financial health than it was during the Great Financial Crisis. And while dividends can’t be guaranteed, the 10% yield also looks more secure than the payouts on offer from Taylor Wimpey’s rivals. 

CEO Jennie Daly’s comments on the company’s outlook will be closely scrutinised when it releases a trading update early in November. With a P/E of just five, however, I suspect a lot of fear is already priced in. 

Paul Summers has no position in Taylor Wimpey.

Legal & General

What it does: Legal & General is a British multinational company that provides insurance, savings and investment products.

By Nathan Marks. I’m looking to Legal & General (LSE:LGEN) for my top British shares to buy for November. As one of the UK’s largest pension funds, it’s been grappling with the recent chaos in the bond market.

The Bank of England took emergency intervention in early October. That was to mitigate a material risk to the financial stability of the types of services that Legal & General provides. However, the company said that this episode had a “limited economic impact” on its businesses and still expected a full-year operating profit of 8%.

Market volatility could still worsen, causing further uncertainty in the company’s balance sheet and liquidity. However, the stock looks great all-round value and I think it’s been oversold. Today it trades at a P/E ratio of 6.8 and yields a very attractive 8.2% dividend.

It’s hard for me to ignore this strong business with historically robust demand for its products and services.

Nathan Marks has no position in Legal & General.

International Airlines Group

What it does: International Airlines Group is an Anglo-Spanish multinational group that is host to renowned airlines such as British Airways, Iberia, Aer Lingus, Level, and Vueling.

By John Choong. Despite a potential recession on the cards, travel demand still remains robust. As such, I think International Airlines Group (LSE:IAG) shares look lucrative at their current price.

In its most recent trading update, the firm disclosed that demand for travel remains strong and is still recovering to 2019 levels. There also seems to be an uptick in business and upper-class travel, which was echoed by its American competitors. CEOs are of the opinion that consumers are still spending despite inflationary pressures, just less on goods but more on services. Therefore, IAG is expected to benefit as the holiday season approaches.

Nonetheless, it’s worth noting that IAG’s high debt-to-equity ratio (107%) isn’t ideal in a high interest rate environment, and is something investors should definitely take note of. The group will have to hope that its free cash flow continues to remain robust through an economic slowdown in the medium term, or risks damaging its bottom line and sending its share price back down.

John Choong has no position in IAG.

Right now, I’ve reached my allocation for this financial year. But there’s one FTSE 250 stock in particular that I’d love to buy at today’s prices.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Games Workshop

Shares in Games Workshop (LSE:GAW) have fallen by 40% since the start of the year. If someone had offered me Games Workshop shares at £60 at the start of the year, I’d have taken their arm off.

So what’s been going wrong? Nothing much, as far as I can tell – the company still has a strong balance sheet and an impressive ability to generate cash. 

The falling share price looks to me like it’s partly the result of inflation and partly due to rising interest rates. As a result, I see this as a great buying opportunity for me.

Inflation

The company’s most recent trading update looks to me like a classic example of a business affected by inflation. Revenue came in 8% higher than last year and profits came in 13% lower.

That’s pretty much what I’d expect to see from a company dealing with inflation. Games Workshop is able to generate higher revenues as consumer spending increases, but this is being offset by higher costs, resulting in lower profits.

This is something of a concern, mainly because it doesn’t look like inflation in the UK is subsiding to the Bank of England’s target levels any time soon. The most recent inflation reading was 10% – a lot higher than the 2% target.

Interest rates

The other thing weighing on the Games Workshop share price is rising interest rates. Unlike inflation, this has to do with investor sentiment rather than the amount of cash the underlying business is generating.

Higher interest rates mean that investors are demanding a better return on their money. As a result share prices – including the Games Workshop share price – have been falling. 

Since rising interest rates are intended to combat rising inflation, this is also an ongoing concern.

A stock to buy

Despite the headwinds, I still think this is a great stock for me to buy. Put simply, I think that it’s just too cheap at today’s prices.

Games Workshop shares trade at a price-to-earnings (P/E) ratio of around 15. I think that’s just too low for a company that has been growing its revenues at an average of 12% per year for the last decade.

The near future might be turbulent for Games Workshop in a difficult macroeconomic environment. But the company has just increased its dividend and I that the stock is underpriced, so if I’d buy it for my Stocks and Shares ISA right now, if I could.

It’s grim, to be sure. However, I’m not selling a single thing. In fact, I’m looking to top up on some quality stocks that now look even better value and could bounce back strongly in 2023.

Almost 50% down!

Nearly halving in value year-to-date, shares in baked goods retailer Greggs (LSE: GRG) have fared far worse than the FTSE 250 index. That’s been sufficient to completely eradicate all my tasty paper profit and send me back underwater.

Could things get worse before they get better? Absolutely. The political shenanigans we saw last week look set to continue, leaving investors scratching their heads as to what to do next. And the one thing we can be absolutely sure about is that the stock market absolutely hates uncertainty.

But I’m looking for positives. Greggs has repeatedly shown itself to be a great business that’s survived many a period of market malaise. And while it certainly isn’t the only option for hungry shoppers and travellers, its value-focused offering is likely to appeal more than most in difficult times.

Trading well

Perhaps most importantly, the food-on-the-go retailer has been trading in line with expectations. Total sales were up almost 15% in Q3. The company also elected to keep its guidance on cost inflation steady at roughly 9%. So long as it can maintain this form, I’m increasingly confident that the Greggs share price could fly back over 3000p again in 2023.

In the meantime, there’s a secure 3.5% dividend yield for those holding the stock. As always, I fully intend to reinvest this back into the market, thus benefiting as much as I can from compound interest.

Quality going cheap

But Greggs isn’t the only FTSE 250 firm whose share price I think (hope) will bounce back to form in 2023.

Having made good money on the stock in the past, I’m also taking advantage of a huge dip in the company’s value to re-build a stake in fantasy figurine maker Games Workshop (LSE: GAW).

Again, this company’s stock has underperformed its index, dropping almost 40%. But, again, I’m looking at the fundamental business, not a constantly-moving valuation driven by near-term sentiment. And in my mind, there are few better UK firms.

While I do confess to not knowing an awful lot about its fantastical world, I do know that Games Workshop possesses a dominant presence in a niche market, a bulletproof balance sheet, and massive margins. All this makes a price-to-earnings (P/E) ratio of 16 — far below the five-year average of 23 — feel very reasonable indeed.

Don’t bottom-pick

Granted, there are still risks here. Even the most devoted followers of Warhammer 40,000 seem to be cutting back. Pre-tax profit in the most recent quarter fell to £39m (from £45m in 2021). Although expected by management, that’s not ideal.

But, paradoxically, it’s this temporary ‘pain’ that’s the Fool’s best friend. And when that recovery does arrive (and investors want to buy growth stocks again), I want to be on board rather than trying to pick the bottom and inevitably missing it.

Our monthly Fire Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of growth-focused Fire recommendations, to help Fools build out their portfolios.

• Games Workshop manufactures miniatures used for wargaming under the Warhammer brand.
  
• The vertically integrated business has no real competitors that can match its control over the design, manufacture and distribution of its models and rule books.
  
• In keeping with its historic release schedule, the latest edition of its most popular Warhammer 40,000 game potentially launches in 2023, and higher profits should follow.
  
• Even if the global economy threatens short-term sales, the company will likely retain strong pricing power in the long run – indeed, its loyal fans are happy to see their collectibles inflate in value each year.

Tritax

Even if consumer spending slows, I expect demand for warehousing to be fairly buoyant. That could be good news for warehouse specialist Tritax Big Box REIT (LSE: BBOX).

The shares have lost 36% of their value over the past year, meaning they now offer a dividend yield of 5.1%. A recession could lead to customers cutting budgets, which might be bad for Tritax. But the business seems to be in good health. In the first half, the contracted annual rent roll rose by 11% and the interim dividend grew 5%.

Tritax has a strong position in a sector I expect to see long-term structural growth. I would buy it for my portfolio today and hold it for the long term.

Games Workshop

One of the economic consequences of a recession can be that people spend less time and money on entertainment away from home, preferring the cheaper option of a night in.

That could be good news for Games Workshop (LSE: GAW). This FTSE 250 business makes money from roleplay games, both physically and online.

I think Games Workshop has a strong competitive advantage that could help it do well. It owns the Warhammer franchise, giving it pricing power and the benefit of a sizeable installed customer base.

I do see risks, such as the company’s concentration of manufacturing. If its main factory has a problem, that could hurt sales and profits.

But with its competitive advantage, 4.5% yield, and the prospect of robust demand, I would buy Games Workshop shares for my portfolio today and hold them during the recession.

City of London Investment Trust

Another of the FTSE 250 shares I would consider adding to my portfolio in a recession is the City of London Investment Trust (LSE: CTY).

Does it seem like a long time since England won the football World Cup? The year that happened (1966) saw the start of a run of annual dividend increases by the investment trust that remains unbroken.

At the moment, City of London has a dividend yield of 5.3%. Past performance is no guarantee of what will happen in future. But I like the trust’s focus on generating income for shareholders by investing mostly in UK companies, particularly large multinationals.

I think that makes sense, especially in a recession when large companies often have stronger experience and resources to ride out the storm than small ones. There is a currency risk to earnings due to a weaker pound hurting the sales prospects of many British exporters. That could reduce the value of some of the trust’s investments.

But I would tuck these shares in my portfolio and hold them through a recession and beyond.

The bear is still around (for now)

But, right now, many stocks are plunging. One casualty this morning is Games Workshop (LSE: GAW), the fantasy miniatures company. As I write, the share price is down almost 14% in just one day — ouch!

However, the business is known for its well-defended position in the market and its impressive quality metrics. So what sin has this high-class enterprise committed today to cause the fall? It released an update and said trading has been “in line” with the directors’ expectations!

Surely that’s a good thing, we might argue. So why has the price plunged as if the directors uttered the uncomfortable words, ‘below expectations’? Perhaps it was the lacklustre outlook statement. The firm said: “We remain focussed on sales growth and cost management.” And that’s a bit trite because it’s what all businesses should be doing all the time anyway — it tells us nothing.

But the first quarter profit before tax of £39m came in lower than last year’s £45m. The directors blamed an increase in costs.  And the stock market has a bearish bias just now. So negative news from companies tends to be punished severely. And anything less than upbeat and positive seems to be viewed with suspicion. I reckon that’s what happened with Games Workshop today.

Growth has disappeared

But one of the biggest problems with the stock is its success in the last bull run. It really took off at the end of 2016 to give its shareholders multi-bagging returns until it began falling in 2021. Impressive annual growth in earnings drove the price. But so did investor enthusiasm causing a big valuation re-rating higher.

And it’s that elevated valuation that is unwinding now, with good reason — the business has gone more or less ex-growth. And it remains to be seen whether that’s a temporary phenomenon or something more enduring. With the share price near 6,090p, GAW is down around 45% over the past year.

The stage is set

Yet not all stocks have been falling over the past few days and weeks. Many had already plunged previously and are beginning to turn upwards. In most cases, that’s because recent results statements have shown the underlying businesses are in better shape than expected.

I think there’s a huge opportunity in the current situation. The bear has knocked the froth from valuations setting the stage for the next bull run. And the one thing I can do to help turbocharge my returns from stocks and shares over the coming months and years is to focus on valuation now.

However, all shares carry risks, even those with a low-looking valuation. Nevertheless, I’ve been buying shares lately when I see tempting prospects and modest prices. But, so far, Games Workshop isn’t among them.

A cheap gem

Games Workshop (LSE:GAW) continues to grow healthily as a business, yet its share price has still taken a haircut this year. The shares are down 30% so far in 2022.

However, the crafter of fantasy worlds and figurines is consistently profitable, which means the stock actually has a price-to-earnings (P/E) ratio. That ratio is currently 18. I see this as a very reasonable price to pay for an established company still growing.

Successful strategy

”Our ambitions remain clear: to make the best fantasy miniatures in the world, to engage and inspire our customers, and to sell our products globally at a profit. We intend to do this forever. Our decisions are focused on long-term success, not short-term gains.”

This comes from the company’s annual report. As a long-term investor, these words are like music to my ears. Games Workshop is a true leader in what it does. Its customers are engaged and loyal. It is a global business that operates profitably (and pays a nice 3.6% dividend too!). And it is genuinely long term in its strategy.

This strategy has worked marvellously, it should be said. Operating profit has risen around 10-fold in five years! The shares are up 300% over the same time frame despite the recent market pullback.

A mini-Disney

“We intend to do this forever.” I don’t see this as an exaggeration from management. The owner of the Warhammer franchise creates stories and characters that resonate powerfully with its devoted customers. In this respect, it reminds me of the Marvel Universe, which is owned by Disney. I view both as forever-type franchises.

Like Disney, Games Workshop successfully monetises its fan base with a never-ending variety of books, video games, merchandise, and a subscription TV channel. The company also jointly publishes comic books with Marvel. And all of this – like every individual figurine character – is bolstered by robust intellectual property (IP). 

International expansion with risk

From its humble first store in London in 1978, the company today has 5,000 stores in dozens of countries, as well as its digital platform. One region with serious growth potential is Asia, where Warhammer is gaining a small but growing cult-like following.

Which brings me onto one risk I see, which is that of fake figurine replicas. Those plastic Warhammer miniatures aren’t cheap and this has created a market for illicit ”recasts”, particularly in China. This could hurt the company’s ability to raise prices moving forward.

Fortunately, though, there is a strong taboo in China around players using fake models. It’s cheating and violates the spirit of the game (as well as Games Workshop’s IP).

I wouldn’t be surprised to see Games Workshop ascend into the FTSE 100 one day. I intend to still own shares if and when that happens.

Today, I’m revealing three examples occupying spots on my buy list.

Games Workshop

I already own stock in fantasy figure maker Games Workshop (LSE: GAW) and I’m looking to add more.

Like most listed companies, the owner of the Warhammer 40,000 brand is having a nasty 2022. Shares are down almost 30% year-to-date as stock markets fret over, well, pretty much everything.

I don’t see this situation changing immediately. Like other retailers, Games could suffer as its legion of fanatical followers understandably prioritise paying their bills. For this reason, the next update we receive from the FTSE 250 member could make for tough reading.

For someone with a longer timeline however, I think a price-to-earnings (P/E) ratio of a little under 19 is already great value, relative to the quality of the underlying business. Attractions here include big margins, a seriously-strong balance sheet, a dominant position in a niche market and plenty of scope to push its valuable IP in new directions.

XP Power

Next on my buy list is power solutions provider XP Power (LSE: XPP). It’s another firm that’s been heavily rejected in 2022 with shares tumbling nearly 65%. Again, I wonder if the market has become overly pessimistic here.

Now don’t get me wrong, things are pretty grim at XP Power. Revenue growth has been held back by component shortages and a resurgence of Covid-19 in China. A rapidly rising debt pile is not something I like to see either.

Once again however, I suspect this is already reflected in the price. A P/E of 10 could prove wonderful value when the good times return. And given just how important the company’s products are, I think the chances of this happening are pretty high. It already had a record order book of £285m going into the second half of 2022.

In the meantime, there’s a 5.2% dividend yield for me to re-invest back into the market (and, potentially, the very company this cash originated from).

Fevertree Drinks

A third growth stock I’m looking to invest in is premium tonic water purveyor Fevertree Drinks (LSE: FEVR). Shares have crashed almost 70% in 2022 through a toxic mix of increasing costs, labour shortages across the pond and less glass being available.

Are any of these headwinds permanent? I don’t think so. And that’s where my Foolish instincts kick in. Ignoring the share price movement, I reckon this remains a great company with a strong premium brand that’s quickly developing a following in the US.

But there’s a problem. Fevertree shares change hands at a P/E of 40. At face value, that’s (very) punchy considering margins have been squeezed hard in recent years. And as purse strings tighten, a bad 2022 could easily turn into an equally tricky 2023.

On the flip side, Fevertree boasts strong finances to weather the storm. And when energy prices do calm down and discretionary income bounces back, I can see drinkers pushing the boat out once again.

Will I buy before then? I just might!

Here they are.

Sustained customer demand

No matter how strong a company is in its sector, if that business area is doomed to failure the business will likely struggle. Buying the best asbestos company of its day would not have helped me as an investor when asbestos stopped being used.

In fact, Buffett’s own company Berkshire Hathaway is an example. It was a US clothing manufacturing company when he bought it.  But as that industry was in terminal decline, the company was never going to do well if it stuck to the rag trade. Warren Buffett has said that, “the dumbest stock I ever bought was Berkshire Hathaway”.

Buffett still made a success of the company by shifting its business focus. But he thinks he could have achieved much better returns with the same capital if he had not tied it up in a declining industry. Such is the importance of investing in an industry that has long-term potential.

I reckon the gaming market is here to stay. If anything, I expect it to grow over time. Even possible risks like a rise in digital gaming could end up attracting new customers to different forms of gaming, in my view. So I like the long-term potential of the business space in which Games Workshop operates.

Business moats

Buffett also likes a company to have what he calls a business moat, which is basically a competitive advantage that helps keep competitors at bay.

One of the attractions of Games Workshop shares to me is that the business has several moats. Its strong brand and customer relationships are key ones.

However, arguably competitors could also build a compelling brand. Another moat Games Workshop has is its own intellectual property. For example, it owns the Warhammer franchise. That makes it impossible for competitors to go up against the company with an identical range of products.

Games Workshop also has its own manufacturing operation. In fact, it emphasises, “We make things. We are a manufacturer. Not a retailer”. In my view, the business is actually a retailer too regardless of how it sees itself. But having its own manufacturing expertise and capacity is definitely another moat in my view. It does also add a risk for Games Workshop shares, though. The concentration of manufacturing means that if the firm’s main factory was forced to close production even temporarily, sales might fall. That could hurt the share price.

Do Games Workshop shares offer me attractive value?

From a business model perspective, I think Games Workshop shares are a classic Buffett-style investment – if I buy them at the right price.

Right now, they trade on a price-to-earnings ratio of 20. That is not cheap. But I think it is reasonable for what I see as a great business. I would happily tuck the shares away in my portfolio for the long term.

That wide difference is largely due to their composition. The FTSE 100 holds several energy and defensive companies, both of which have performed well.

Meanwhile, the FTSE 250 holds many retailers and travel shares, both of which tend to suffer in a recessionary environment.

But today, I’m looking to the future. I’m searching for shares to buy for the next bull market. Recessions come and go, but eventually growth will pick up and many shares that have performed poorly this year could do well in the coming years.

Finding the best shares

There are several factors I’d consider when looking for the best shares to buy. First, I only want to own high-quality businesses with double-digit profit margins.

Like hugely successful investor Warren Buffett, I’d also look for companies with a ‘moat’. That means they must have a competitive advantage, like a unique product or a popular brand.

Companies that are currently growing their earnings are preferable. But equally, I’d be interested in new products or services that could lead to higher sales in the future.

Balance sheet strength is important. I’d like to own companies with low levels of debt and plenty of cash flow.

FTSE 250 top pick

That leads me to companies that look well-positioned for the next bull market. At the top of my list is fantasy miniatures business Games Workshop (LSE:GAW). This is a well-run business that aims to survive forever. That long-term goal results in a conservatively managed firm that has a keen eye on longevity.

A word of warning, however. As the cost of living continues to rise, many people might find they have less spare cash to spend on hobbies like this. Rising manufacturing costs might also put some pressure on margins.

That said, it operates some strong brands and customers are unlikely to go elsewhere. Also, Games Workshop is a high-margin business, even when faced with greater costs. That’s why I’d consider buying it, and I’ve added it to my watchlist.

A star retailer

Next, I’d look at Dunelm (LSE:DNLM). This homewares retailer is growing market share ahead of its competitors. In turn, that has led to sales that are 40% higher than pre-Covid levels.

A strategy of developing its digital offering is paying off too. Digital sales are more than two-and-a-half times higher than pre-Covid levels.

But it’s never just about sales. Profits are important too. So it’s great to see that Dunelm operates with a double-digit profit margin that has gradually climbed over several years.

That said, tightening customer finances could still impact sales and profits over the coming months. How this share performs during a recession is uncertain. Also, a new CEO takes the lead early next year, which could mean further uncertainty.

Overall though, this FTSE 250 retailer looks like a quality share to me. It has a return on capital employed of over 40%, a 6% dividend yield and a price-to-earnings ratio of just 11 times. That’s a cracking combination, and I’d consider buying it this year.