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As a long-term investor, I am looking to buy shares that I can hold for the long term. Sometimes, the businesses concerned may hopefully grow big enough to be promoted to the FTSE 250 – and later even the FTSE 100.
One FTSE 250 share I think merits long-term investors’ consideration at the moment is Hollywood Bowl (LSE: BOWL).
Why I like the business model
Is 10-pin bowling cool, with the cachet of a buzzy leisure activity like padel or pickleball? No – and for as long as I can remember, it never has been.
But it has always hung around. By not being a buzzy trend, 10-pin bowling also feels less likely to fall out of fashion when trends change. After all, it is not exactly in fashion in the first place.
A certain number of people in each generation like to go bowling, even if only occasionally. That gives the leisure activity durability.
A bowling lanes operator can do well thanks to lane and equipment rental fees, as well as ancillary items like food and drinks. Some such facilities are operated as standalone businesses, but Hollywood Bowl’s growing collection of centres gives it economies of scale.
As well as continuing to grow in its home UK market, the company has also expanded to Canada, where I see substantial growth opportunity simply from buying existing single facility operators, let alone opening new ones.
Long-term potential
At the moment, this FTSE 250 share sells on a price-to-earnings ratio of 17. That does not strike me as a screaming bargain.
Bear in mind though, that I am taking the long view. From that perspective, I think the valuation is attractive for a company with Hollywood Bowl’s characteristics.
It has a strong position in an industry that ought to benefit from ongoing demand. It has space to grow in its home market as well as in Canada. Further down the line, I can imagine its operating model could be rolled out to other markets.
Hollywood Bowl has more than just bowling lanes in its portfolio, incidentally. It has also been expanding its mini gold offer.
I see that as potentially a good add-on, but the main appeal for me is the company’s core business and the long-term growth potential it offers.
Passive income potential
Meanwhile, the company’s dividend yield of 4.4% also looks attractive to me.
Any company can face challenges. Pandemic restrictions wreaked havoc on Hollywood Bowl’s ability to opens its centres for business. There is a risk of such disruption in future should there be similar restrictions in a public health incident.
The Canadian expansion also brings risks, as well as opportunities. Overseas expansion can be fraught with unseen difficulties for any company and Hollywood Bowl’s focus has historically been domestic.
Still, I continue to see a lot to like about the investment case. I regard this as one FTSE 250 share for investors to consider.
