There are few companies that weathered March’s stock market crash as well as Games Workshop (LSE: GAW).
The FTSE 250 company was trading at around £70 per share at the end of February 2020, before plummeting to £35.90 on March 19th. By the start of June, it was averaging £80 as if nothing had ever happened.
Now, its share price is hovering around £105 per share. This is up 193% from March 19th – and up 1,804% compared to mid-October five years ago!
This incredible growth and resilience is why Games Workshop is currently my number one post-stock market crash investment, in more ways than one.
Buying Games Workshop now
Games Workshop’s share price might look like it’s peaking, but I think there is a lot to suggest that the company will continue to grow for a while yet.
Firstly, despite March’s stock market crash and the closure of its physical stores from then until early summer, Games Workshop secured a £45m profit in the three months leading up to August 30th. This was £17m more than the same period last year, and “ahead of the Board’s expectations”.
The company also seems confident in its own growth. Not only did its CEO, Kevin Rountree, purchase new shares at the end of September, but he called 2020 “the best year in Games Workshop’s history, so far”. Emphasis on the conviction with which he added “so far”.
Finally, its long-term outlook as a whole excites me. Games like Warhammer have a committed, stable audience that is constantly expanding. Beyond that, opportunities for TV, film and video game adaptations of its products would secure the company massive royalty payments, while simultaneously advertising its products to potential new consumers. Harvey Jones agrees that these long-term benefits make Games Workshop a worthy investment.
Playing the lockdown game
With Keir Starmer and SAGE calling for a ‘circuit breaker’ and cases of Covid-19 rising dramatically in the UK, another national lockdown is looking more and more likely.
While the financial impact probably won’t be as great this time around, share prices will still inevitably drop across the board, with a second stock market crash certainly not impossible. I believe that investing in Games Workshop upon that second crash could be a great way to attain valuable shares at a low price.
As mentioned above, it took the company just two months to recover from March’s crash. This was down to the strength of its online channel, with customers seeking to entertain themselves while stuck at home. Chances are, a second lockdown would cause a similar spike in online sales, and should this be even half as impactful this time around, you’d still almost double your investment (plus dividends) within about six months.
For balance, he might not be as convinced by the long-term future of Games Workshop, but Paul Summers agrees that another stock market crash would make the company an interesting opportunity.
While a re-evaluation of its share price could interfere with growth a few years down the line (its shares are currently trading at almost 50 times the company’s earnings), I still think Games Workshop is one of the most promising investments out there at the moment, whether you trust its continued growth, or wait for another stock market crash.
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Dan Peeke has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.