Every year, British investors get up to £20,000 they can invest in the stock market entirely tax-free using a Stocks and Shares ISA. It’s one of the most powerful wealth-building tools in the country. And using as much of this annual allowance each year is crucial for those aiming to get seriously richer.
Even when following the basic strategy of investing in index funds, £20,000 left to compound for a decade grows to more than double at an 8% annualised rate. And by maxing out the ISA allowance every year during this decade, this amount surges to just over £300,000!
Yet, this could be just the tip of the iceberg. For successful stock pickers, even without making any extra contributions, a £20,000 Stocks and Shares ISA 10 years ago could now be worth more than £340,000. Here’s how.
A quiet multi-bagger
With most investors distracted by prominent FTSE 100 stocks such as Lloyds or Rolls-Royce, not many investors have Goodwin (LSE:GDWN) on their radars. Yet, despite this lack of popularity, Goodwin shares have been among the best-performing investments of the last decade.
As a quick introduction, Goodwin is a UK-based specialist engineering group manufacturing high-integrity machined castings and mineral-based powders. It’s certainly not an institution most people encounter every day. But for the energy, jewellery, defence, mining, and steel industries, Goodwin sits at the heart of the value chain.
Since 2015, management’s shifted focus away from the cyclical oil & gas sector to capitalise on more consistent opportunities within the defence and nuclear sectors. And through a series of substantial contract wins as well as cornering the jewellery market among emerging countries, the profits have just continued to quietly compound.
The result? A 1,603.6% total return since December 2015. That’s the equivalent of 32.8% a year – 4.1 times more than the UK stock market’s average performance!
Still worth considering?
The result of all this phenomenal success is that Goodwin shares are now trading close to an all-time high. And yet, with a market-cap of just £1.55bn, the group still has plenty of momentum in its growth engine.
After securing lengthy submarine and nuclear contracts, its order book stretches out for years, not months. Goodwin’s recent partnership with Northrop Grumman has opened the door to the US defence supply chain. And with manufacturing efficiency on the rise, profit margins are seemingly set to expand even further.
This growth trajectory’s only being accelerated by the rise in global defence spending, particularly within the UK and Europe.
However, this also serves as a double-edged sword. If political priorities shift, defence spending could suffer, reducing opportunities for expansion. What’s more, it’s important to highlight that the Goodwin family still control the lion’s share of voting power, with the governance often being criticised for the lack of independent directors.
Put simply, if the Goodwin family start making questionable decisions, there’s little recourse available for shareholders.
Obviously, not everyone has the risk tolerance for investing in what essentially amounts to a private fiefdom.
Nevertheless, the Goodwin family have proven to be excellent stewards of their engineering empire. And with such an impressive track record combined with ample growth opportunity, it’s a business I’m currently considering for my own Stocks and Shares ISA.
