Who would have thought that shares of quirky Games Workshop (LSE: GAW) could have turned a £10,000 investment into more than a million pounds in just 15 years?
Certainly not me, that’s for sure. I only cottoned on to the FTSE 250 firm’s powerful competitive strengths a few years back. I’m glad I did though, as the stock is up 60% in the last year alone.
But would I buy the shares today? Let’s take a look.
An amazing performer
The stock chart above tells me that on Wednesday 16 July, 2008, the Games Workshop share price opened at 122p. Today, it is at 11,127p.
That’s an unbelievable 9,020% return!
So, if I’d invested £10,000 in the stock 15 years ago, I would now have around £909,000.
But that’s not all, because the stock has also paid numerous dividends over that period. Adding those in would take my total return to well over £1m!
My £10k investment would have bought me about 8,196 shares in 15 years ago. Those would have netted me over £20,000 in dividend payments this year alone (so far).
Even recently, Games Workshop shares continue to significantly outperform the FTSE 250. They’re up 247% over the last five years, against a drop of 10.75% for the index. And since the turn of the year, they’re up 30%, while the index has fallen 1.5%.
This shows just how powerful long-term investing can be, particularly when picking individual stocks.
Digital transformation
Turning back to the chart, we can see that the share price really clicked into a higher gear in late 2016. It started October of that year around 513p and just 12 months later it was trading at 2,039p.
What happened here to increase the company’s market valuation so dramatically?
Well, this period coincided with CEO Kevin Rountree’s decision to allow independent retailers to sell its products online. This fueled growth and further advertising for the Warhammer brand around the world.
This was a time when the company really started to focus on the licensing of its intellectual property.
Simple but powerful
Today, after four decades creating rich fictional worlds and characters, the company has built up an extremely dedicated and loyal global fan base.
Yet its business model remains relatively simple. It designs and makes its own products, controlling the whole value chain from manufacturing to distribution. And it enjoys surprisingly strong pricing power, which helps preserve a healthy profit margin.
Indeed, the company announced in June that it will report at least £170m of profit for its last financial year (which ended 29 May). That represents an 8.3% increase on the year before.
Looking forward, its recently announced deal with Amazon to make a TV series and film from the Warhammer 40K universe has the potential to bring in many more fans.
Would I buy the shares today?
After rising for many months, the stock is quite expensive right now. It has a price-to-earnings (P/E) ratio of 26, which could add some valuation risk for new investors today.
But if there was a dip in the share price, I would happily add to my holding. For now though, I’m happy to keep holding my shares while I hunt for cheaper UK stocks.
