It was not an straightforward time for the bakery’s shareholders Greggs (LSE:GRG). I bought Greggs shares in the hope that the company’s economic situation would improve, but although I am sanguine about the long-term prospects, I am starting to have a worse feeling about the direction of developments this year.

Greggs has lost value, although the profitability is attractive

Take the last 12 months as an example.

The Greggs share price fell by 14%. So someone who invested £10,000 12 months ago would now make a paper loss of around £1,365.

This is just a waste of paper. It may disappear if the share price rises before the shareholder sells the stake.

Still, it can be uncomfortable to buy a stock thinking it’s a bargain and then watch it continually appear in red ink on your portfolio statement!

There is also an opportunity cost. Money used for a stock that fell could instead be used for a stock that rose during that period. Of course hindsight is a wonderful thing!

But it’s not all bad news. There is a dividend yield and at 4.5% I consider it attractive.

The higher share price a year ago means someone investing at that time would have earned a slightly lower rate of return, but £10,000 should still earn close to £400 a year in dividends.

Events are testing my optimism

At a basic level, I think Greggs is a very good business.

It has a plain but effective, proven business formula. It operates in a market where demand is quite resilient, and its focus on costs gives it a mighty advantage over some rivals.

However, things are changing that threaten this investment.

First, demand for affordable and convenient foods may not be as resilient as expected: appetite suppressants pose a risk.

Then we have Greggs’ cost basis. The vast number of employees means that higher social security and wage costs have eaten into profits.

I consider it a constant risk. But I’m also concerned about what rising energy costs will mean for the company’s bottom line, at least in the miniature to medium term.

With several thousand stores using ovens and other energy-intensive equipment, Greggs’ already huge energy bills could rise even further.

Taking a long-term approach

Such risks mean Greggs shares could have a bumpy road ahead.

However, I think that in this case a long-term approach to investing may work.

This risk is real and I believe it has the potential to outperform the Greggs share price in the foreseeable future. However, even though my money is tied up in Greggs shares, by owning them I at least get a vigorous dividend.

I still find the fundamental investment issue attractive and hope that over time the share price will rise again to reflect this.

So, taking a long-term approach, I plan to simply hold my shares and continue to collect any dividends the company pays.