Thesis for investing in Games Workshop and Supreme

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17th Nov '21 by jonkingston

33 comments 1950 reads

For this episode I had the pleasure of being joined by David Collins, founder of Howay Investments and fund manager of the Howay Equity Fund.

Over the 20 years prior to founding Howay Investments, David worked in both London and the United States in senior management and investing roles for Prudential, Och-Ziff Capital (now Sculptor Capital) and Morgan Stanley.

In this episode David talks about his investing style, how he generates ideas, and provides a superb breakdown of two quality companies he's bullish on for the long run.

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About the Author

Jonkingston

Premium Member

Founder of Capital Employed Newsletter. https://www.capitalemployed.com

33 comments

dodge1664

18th Nov '21

thanks for the info Jamboreebop!

On further research, it seems that the GW boycott has run out of steam. My gut feeling is that Warhammer addiction will keep the nerds going back to GW, even if a vocal minority have been upset.

It seems plausible to me that affordable and accurate 3D scanners & printers might be available in a few year's time, and if that happens I don't see what GW can do to stop someone buying one figure, and then making as many copies of it as he likes. The IP department aren't going to come knocking on the door. Currenly they can stop someone reselling a 3D printing template or a figure on a commerical website, which is a sufficient deterent.

Jamboreebop

18th Nov '21

"It seems plausible to me that affordable and accurate 3D scanners & printers might be available in a few year's time,"

I was going to come back with a rebuttal to that, but after a bit of Googling it seems that things are moving on apace https://www.youtube.com/watch?... and https://all3dp.com/2/3d-printe... So thanks dodge1644 for making me question my bullishness.

Yes, it seems that if you're determined enough...and buy all the kit...you could probably make some convincing copies of GW products.

But what proportion of the fan base are going to do that? You could also argue that there's nothing to prevent people making their own wargaming boards, photocopying the rulebooks and Warhammer novels and pirating the official Warhammer videos. All this has been possible for years but it doesn't seem to have hurt Games Workshop (LON:GAW) sales too much.

Like you, I think the Warhammer addiction amongst the fans is strong enough for them to keep buying the official merchandise...though I'm sure there will be always be an enterprising minority that want to find cheaper options.

Db47

18th Nov '21

Hi David,

"When you heat glycol it creates a substance called formaldihide which is cancerous when it gets inside the body"

yes I wouldn't recommend ingesting formaldihide, my understanding is this theory dates back to a study where the glycerol was heated to extremely high temperatures, aversive to e-cigarette users (it would create a 'dry hit' or burning taste)

I acknowledge it's better to breathe clean air then vape e-liquid but would advocate vaping to a cigarette smoker just as the BMI would concur it's 99% safer, and with plans to prescribe vaping products by the NHS there's little credibility to your understanding of the link between vaping and formaldihide. It's certainly not a bear case for investing in Supreme (LON:SUP) (I hold)

Daniel

MiserableJacktPotato

18th Nov '21

They don’t generally sell them in boxes of one. And any model they sell in ones you tend to only want one in your army.

So, you’re going to spend £15 on a character model, scan it and print it then try and find people who want to buy it. But most people are decent and know that buying a rip off causes the shop they get their stuff from (and need to stay open to have somewhere to play) to close down.
This is no different to people ripping off any other kind of branded goods. Most people will laugh at you when you’re rocking a knock off.

jonkingston

18th Nov '21

Thanks for your thoughts on 3d printing.

Not to go off on a tangent but as you work in the area - which 3d printer would you recommend for kids who are interested in doing it for the first time?

Jamboreebop

18th Nov '21

Thank you dodge1664 for making me question my own bullishness on £GAW.

Your post prompted me to do a bit of Googling...and it seems a determined person with the right kit could already do a reasonable copy of a GW miniature https://www.youtube.com/watch?... & https://all3dp.com/2/3d-printe...

But they could also make their own gaming board, photocopy the rulebooks and novels and pirate copy the videos. This has been possible for years and doesn't seem to have hurt GAW's sales too much. So I don't believe 3d printing poses a special threat to Games Workshop (LON:GAW)

My gut feel is that the vast majority of GW fans will want the proper product.

Jamboreebop

18th Nov '21

3d printing is only a peripheral part of my work - and this is sourcing prints from printing agencies that use machines costing £50-100k - so I haven't any useful advice on home 3d printers.

But hobbist 3d print machines seem to be coming on in leaps and bounds (as dodge1644 was suggesting), and prices falling all the time. So I'm sure there there are plenty of reviews on the Web that'll help you.

dodge1664

18th Nov '21

this one seems to be one of the best of the current batch:

https://www.amazon.co.uk/ELEGO...

if you look on You Tube there are quite a few people claiming to have decent results even with the currently available models

dodge1664

18th Nov '21

I'm sure plenty of enthusiasts consider the prices charged by Games Workshop to be an indecent rip off, so I'm not sure your moral angle would get much support. Also enthusiasts know one another, so one enthusiast could buy a character model and then simply give a copy to all his friends.

MiserableJacktPotato

18th Nov '21

How much do you actually know about these people?

Jeffvshepherd

19th Nov '21

dodge1664,

Regarding your second point, if you don't defend intellectual property you lose it.

Jamboreebop

19th Nov '21

Yes dodge1644, your initial post prompted me to do a search and I found several YouTube videos showing 3d printed GW copies and also a site where you can download the STL files to create them from currently available printers (I posted an earlier reply but my post had the web links in...and for some reason the post was marked for review and never appeared).

So it seems that it currently IS possible - with the right kit - to copy some Games Workshop (LON:GAW) product. But I suspect these people are going to be a small minority, I believe that most GW fans are going to want the genuine product - and that includes the rulebooks, novels and videos, that GW also produce.

Rusty2

19th Nov '21

That maybe so in the west but what about China? Will people there care about it being genuine?

jonkingston

19th Nov '21

Thanks.

jonkingston

19th Nov '21

Thanks.

MiserableJacktPotato

19th Nov '21

Literal whataboutery.

The Chinese market is tiny. If GW get to the point where the Chinese market is significant then it's worth noting that they make everything in the UK, the Chinese can't just rip it off at the production line. GW don't make all their money on minis - large amounts of it come from harnessing the ip - books, computer games, videos, Warhammer+ which are much harder to rip off, so would be a big boost for the top and bottom lines even if they're ripping off the minis.

It's less of a problem in the West. Clear and enforceable IP protection. Plus the players tend to be smarter and richer, whilst the models are expensive people tend to pay up because they are very high quality. Added to that, it's widely understood that you need somewhere to play. If you buy rip offs your friendly local games store (your flgs - it's a thing, trust me) will be forced to close down and then you'll have nowhere to play. Most FLGS offer significant discount to the Warhammer branded stores - 20% is not uncommon.

And to Dodge's point about buying a character and copying it and giving it to my friends - across the five friends I mostly play with, none of us has the same army and we've all got at least two each. I suppose sure, some of us might have bits of an army that overlap, we've all been playing for over 20 years, but not significantly. Who wants to always end up fighting the same opponent?

Rory2021

12th Jan '22

For me the interesting part of the recent results announcement was the 231% increase in Royalties, which appear to go straight to the bottom line: Royalties receivable £20.1m/ £8.7m. Maybe this gives an indication as to why GAW is being so protective of its IP. The Company has 30 yrs deep IP and I suspect that will be the real driver of profit growth over the next 10 years, or possibly lead to a takeover by one of the big media groups. This is a business that still has a huge amount of shareholder value to deliver, hopefully!

Caper4

20th Jul '22

Thought I would do some direct research on Games Workshop (LON:GAW) last week so took my grandson to their Kingston shop. He is aged 12 but had never heard of Warhammer games , so I thought he would be ideal research material . On our arrival the two assistants in the shop, went to a lot of trouble explaining the games to my grandson and even gave him a few models to take home . Sure enough , the next day he pleaded with his mother to take him back , and she ended up buying him a £60 entry level game. He seems hooked and the experience has persuaded me to take a small position :)

His mother maybe not so happy .

MiserableJacktPotato

20th Jul '22

What did he get? Warhammer Underworlds and Warcry seem very good for younger players. Kill Team I found too fussy, not their best release. The big sellers, Age of Sigmar and 40k are great but take 3 hours plus to play so something to work into. There's so much to explore, there's a thousand stories with a universe that's every bit as big as Star Wars (probably bigger) with more room to be creative - they deliberately leave gaps in the information so you can do your own thing and still make it fit the lore, and I've spent the last week just painting my little guys getting them just how I want them. I'm sure there's many here who'd call me a throbber or other pejorative for that, but we don't care, we're used to it.

Perhaps the most fun part when you're starting out is working out which little guys you want to be your top boys. Everyone starts out with the Imperium, which is fine, but the aliens or the heretics are more fun. Screw the Emperor :D

Caper4

20th Jul '22

Frankly I am not sure what he bought as he has taken it back to South Africa . I have already been asked to buy more before we go back in a couple of months . Thanks though for your input ;)

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Thesis for investing in Games Workshop and Supreme

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About the Author

Jonkingston

33 comments

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