Ten years ago, if an investor put £20,000 to work in a FTSE 100 index fund using a Stocks and Shares ISA, they would now be sitting on £36,580. But this number jumps even higher if that investor prudently picked winning stocks.
For example, over the same period, Games Workshop (LSE:GAW) has skyrocketed by over 2,680%, including dividends, transforming £20,000 into an unbelievable £556,800!
To be fair, success stories on this scale are pretty rare. And stock picking can be quite a tricky task.
It’s easy to look back and say the growth potential for Games Workshop was so obvious, given the rising popularity of the Warhammer brand and the associated pricing power. But at the time, suggesting a near 27x return was on the horizon would have likely got you laughed out of the room.
Looking ahead, I think a repeat performance of this scale from Games Workshop is unlikely. After all, it’s no longer a small-cap, growing into a multi-billion pound enterprise, climbing the ranks of the FTSE 100. However, studying its past success could help uncover the next ‘Games Workshop’ stock and deliver monumental returns over the next decade.
How much might investors expect in a decade?
Over the long run, the FTSE 100 has historically delivered an annualised return of around 8%. By that logic, it’s not unreasonable for investors to anticipate having an ISA worth £44,392 by this time in 2035. Of course, that assumes the UK’s flagship index can keep up with its historical pace.
But what about finding another stellar winner like Games Workshop? One company I’ve been steadily adding to my Stocks and Shares ISA is Alpha Group International (LSE:ALPH).
The foreign exchange risk management and alternative banking enterprise has been carving out a niche within the corporate banking space. And that’s proven to be highly lucrative, given it’s already grown large enough to join the FTSE 250 despite only going public in 2017.
Leadership’s now leveraging its newly-acquired prestige to double down on its disruptive strategy of stealing market share from archaic corporate banks that still dominate the space.
In other words, Alpha’s hunting for more market share. And given the global FX risk management industry’s expected to reach £1.6trn by 2033 and alternative corporate banking’s on track to hit $435bn by 2030, the group’s £135.6m revenue stream barely scratches the surface of its potential.
Nothing’s guaranteed
Despite my bullish position on Alpha, there’s no guarantee the stock will deliver a positive return, let alone a Games Workshop-sized gain.
Demand for the firm’s services is strongly tied to volatility in the currency markets. Given the current geopolitical climate, volatility in currency exchange rates is currently elevated generating a tailwind. But should the environment begin to calm and currencies stabilise, this catalyst for growth will dissipate, potentially slamming the breaks on Alpha’s impressive double-digit growth track record.
Its alternative corporate banking division helps alleviate some of this cyclical risk. But that also comes paired with additional regulatory and competitive challenges.
Personally, given the potential reward and impressive track record, these are risks I feel are worth taking. But whether Alpha will go on to deliver gargantuan returns for my Stocks and Shares ISA, only time will tell.
