Page 1 of 56 1 2 3 11 51 ... LastLast
Results 1 to 20 of 1119

Thread: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

  1. #1
    Chapter Master Reinholt's Avatar
    Join Date
    Sep 2007
    Location
    New York, New York
    Posts
    2,096

    Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    I made a terrible mistake this morning, and I read this article on BoLS.

    After shaking my head sadly, turning my attention back to work for a while, downing an entire large coffee, and diving deep into the morass of negotiating legal terms around trades, I came back to it. I shook my head again.

    So, I wanted to post this on Warseer (my favorite grounds for this kind of thing, truth be told), and see if I can start a discussion that would actually clear up some of the misconceptions around GW and what is actually going on with them as a business, from a financial perspective.

    As a little background, I work on Wall Street. Not literally; the only actual bank left on the physical street is DB and virtually none of the buy side firms are there. Most of the banks are now scattered throughout midtown ranging down into flatiron, and a few are downtown. The asset managers are shotgunned across NYC, Jersey, and the rest of the northeast (and are spreading into the west), and hedge funds... well, look, three dudes, one computer, and a broom closet can qualify as a hedge fund, so what the hell can I really say? Point is, I have an MBA from a top-tier school, I run a trading desk, and I've been doing this for a while. I would caveat that all of this is my personal opinion, I am in no way representing any firm, and that none of this is intended as investment advice (I own no GW stock). In fact, you probably shouldn't read it. Your eyes will likely start bleeding, you will wail and gnash your teeth, and then you will smash your forehead through your monitor / ipad / tinfoil hat. Consider yourselves warned. After that, I will take questions.

    Why shareholders are not the problem, or at least not in the way people think they are

    Public companies are beholden, first and foremost (though not always only) to their shareholders. Those are the people who, you know, literally own the thing. GW has them. There are those who claim that GW is run by some shadow conspiracy, or in the palm of Tom Kirby as a maniacal dictator, or that a small group of nefarious insiders are deliberately destroying the company. All of these things are untrue. Several of them are also illegal.

    If you want to know who owns GW, all you need to do is have a Bloomberg terminal, grab the GAW ticker, and run the OWN and HDS reports, which helpfully gives you the owners of the firm. Roughly speaking, GW has a pretty atomized ownership structure. ~14.5% percent appears to be owned by insiders (Kirby, other directors, former c-level executives, etc.), ~81% of the owners are from the UK, ~80% are owned through investment advisors (retirement funds, asset managers, and the like), and the largest individual holding is around 7% (Kirby).

    In a technical sense, to have a controlling interest in a public firm, you need > 50% of the voting shares of a company. Nobody is close to that with GW. What you should realize, however, is that 80% ownership of investment advisors in a very small company means that it is unlikely anyone is paying much attention to GW at all, as they care about the returns of their portfolios, and GW is a tiny piece of your portfolio. GW is a tiny, tiny fish in the global stock market. To put this in concrete terms: Apple is worth 2,758.92 times as much as GW at the time of this writing. Worrying about GW for most portfolio managers would be like worrying exactly how much change is in your couch while your ferrari is on fire in the driveway. It's literally not worth their time.

    In a literal sense, firms like this often tend to be inefficient. This is why activist shareholders and hedge fund managers can make money (think of them as adults who show up and rudely force the children to behave), why managers can do things that are destructive to the long-term interets of the shareholders for long periods of time before anyone notices, and why companies often take forever to die even if they are terrible (because nobody is paying enough attention to take their ball away). If GW's behavior looks mildly insane, as though no adult supervision is going on, or as though nobody who really knows how to run a business is paying attention, that's probably because all of those things are likely to be true.

    With that said, there are generally two things that can make you a successful public company in the long run:

    1 - You consistently grow your customer base while preserving your margins (eventually). Growth is the key driver of most (though not all) stock prices. Grow, grow, grow, grow, and figure the rest out later is a recipe several firms have used successfully. These firms tend not to pay dividends (they are re-investing the money to grow the firm), have increasing sales and customer bases, and are largely valued on the basis of future earnings.

    2 - You have a stable customer base, a strong edge/moat, and return tons of capital to your shareholders while earning an above-market return on your capital. This is less common, because most companies are unable to accept they are out of growth. Even more so, most companies are bad at returning capital for all kinds of issues I won't get into here. However, when you find the companies that do this, they are often undervalued and hugely valuable.

    I would suggest that GW is neither of those, which leads me to a core point: GW's problem is not being a public company. There are plenty of successful public companies. The shareholders are not demanding that GW sacrifice their future and destroy all of the capital they have been given to get some pissant 2% dividend today. The shareholders are not demanding that GW shrink their customer base, release books ridden with typos and unclear language, and open and close their stores at erratic hours with unsuitably low staffing levels. The shareholders want a stable, average to above-average long-term return on their capital.

    The problem with GW is their management, and the fact that nobody is paying attention from an ownership perspective (and probably won't be until GW is in much worse shape than they are now).

    Stock prices are an excellent indicator of how bad humans are at stock pricing

    You shouldn't read too much into GW's short term price movements. My favorite example of this sort of issue was Lehman Brothers. In early 2008, it was trading for roughly $20 per share (adjusted for splits, etc, as best I can from the historical data I have handy). At the end of 2008, it was trading for $0 because it was dead. What will GW's stock price be a year from now? Will it even have a stock price a year from now?

    Note: I am not predicting anything here. I am merely pointing out that we love to imply meaning into things that may not have any discernable meaning when it comes to patterns, and stock prices bring out the worst in the human mind about this.

    In aggregate, in the long run, I do believe stock prices tend to be correct-ish. However, correct on average does not mean correct at any given moment, and especially does not mean correct about what the future price will be. Just remember: all firms will eventually go bankrupt, shut down, or be acquired. Nothing lives forever.

    Whenever anyone writes an article primarily focused on the changes in stock price without a clear explanation of why that price is changing (as the price, over the long run, should reflect the actual fundamental performance of the firm), you should ignore it, because they aren't communicating any information and probably have no clue what they are talking about (or have a clue but can't communicate it, which isn't any more helpful to you as a reader). If they can communicate it, you should still think long and hard about if you believe they are correct. There is far more bull---- about finance out there, due to a combination of lack of knowledge and people trying to take your money, than there is useful information. You should be reading even what I am writing here with a skeptical eye (though at least I'm not trying to sell you anything). I can assure you I am not always right.

    WTF is actually going on with GW then, you stupid looking orange cat?

    If I were to boil GW's problems down to a few key points, it would be the following:

    1 - Uneven product quality
    2 - Mismatch between production & design, pricing model, and customer/segment expectations
    3 - Lack of business capability at all levels of the firm

    These problems, to be clear, are not unusual. I've seen them in many, many situations over time. Most small to medium size firms are terribly managed, and GW is remarkably average in that regard. To that end, all of their problems can be traced back to poor management (and I'd be glad to expound of any of these points as I have in the past, if anyone is even more of a masochist than most people who have read this far).

    This is the key: poor management is leading to products that don't match what the customers want, to pricing that is actively adversarial to the goal of selling to customers and retaining them, to confrontational/absent relationships with a customer base that wants to be engaged or independent sellers, and to opening up market spaces for competitors to consistently chew away at GW.

    In terms of observables, there has been a single trend that has concerned me about GW for 5+ years now: losing customers. Even if you raise prices enough to cover the lost revenue, this cannot continue forever. Eventually your customers will go to zero (more realistically, the price increases stop working at some point, which is about where GW put themselves today, and now they aren't smart enough to figure out how to get back out of it).

    Mr. Orange Cat, GW is profitable now and you are just some idiot blowhard on the internet. How dare you question them?

    Hyperboli aside, this is another line of thought I often see (GW is still in business, so they are fine), to which I offer the long-running counter-example of companies like GM, Lehman, or any of the thousands of small and meidum sized companies that have gone bankrupt. Perhaps Sears is a good example of a downtrend right now. Companies are fine until they are not. Problems are usually observable before profits go completely to hell. This is why some companies in the red are not considered problems (they are in the red because they are either growing rapidly and funding that expansion, or because of temporary/fixable issues), and some companies in the black are considered problems.

    Or, to put another way, would you argue that the train is still on the rails, so it's not a problem, even if it was about to ram straight into another train in 10 seconds?

    Past performance is not an indicator of future performance. All firms that went bankrupt were operational at some point prior to that. I am not predicting the imminent demise of GW, either. I am predicting that they will either be gone (through bankruptcy or being eaten by someone bigger), or much smaller in the next decade-ish if they don't change their ways.

    So what could change things and what is a "turn around"?

    This one is simple: GW will have turned around when they being growing at the same rate as the segment again, retaining their current customers, and adding new customers.

    Until this happens, the rest is all just hot air. If you want to argue things at GW have changed, you need to argue they are adding people instead of losing them. That is the bottom line. Anything else is just noise.

    Okay, that's the majority of what I have to say for now, but if anyone was foolish enough to read all of that, I'm glad to discuss/debate/expound of any of it. Enjoy.
    Quote Originally Posted by Arkfatalis View Post
    I reckon we should start a facebook group where we encourage people to buy £20 of GW shares and then elect Reinholt as head of GW, so it will last forever !

  2. #2
    Commander Confessor_Atol's Avatar
    Join Date
    Jun 2006
    Location
    Seattle, WA
    Posts
    793

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    I really appreciate you synthesis, and analysis. I'd be lost in a morass of financial speak without some interpretation.
    Maw gazers-2011-2012 Ogre Plog*updated 7/06/12!*

    Bugman's upland throng-2010-2011Dwarf slog

    Quote Originally Posted by papabearshane View Post
    Great advice! You sir are a true Gentelman and a Drunk

  3. #3
    Chapter Master
    Join Date
    Oct 2012
    Location
    Scotland
    Posts
    2,223

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    A very good read, thanks. I gave up on the BoLS article pretty quickly since it was claiming that the new magazine formats were so well received, it just struck me as someone justifying their hobby.

  4. #4

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    I must say, I'm not financially minded but you have a habit of writing very understandable, without throwing around complicated words (especially problematic for non-native speakers) and you give good examples to illustrate it, too, so reading all of this was far less painful than you seem to think. Actually I enjoy all of your posts. While it is true that everything on the internet should be taken with a grain of salt, what you say usually sounds very reasonable. I can see no obvious flaws in your reasoning, so I'm inclined to trust you. Now hopefully you didn't hide any fineprint in your post so I'm obliged to buy some garbage from you now in exchange for your financial analysis.
    Last edited by Ultimate Life Form; 23-05-2014 at 16:40.

  5. #5
    Librarian
    Join Date
    Jan 2014
    Posts
    343

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Nice read, good explanations as usual. Thanks.

    The BoLS article is a fanboy talking about something he doesn't understand.

  6. #6
    Librarian
    Join Date
    Sep 2007
    Location
    Vancouver, B.C.
    Posts
    492

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Great post, thanks for taking the time to write this.

  7. #7
    Chapter Master ColShaw's Avatar
    Join Date
    Mar 2010
    Location
    The Frozen Hell of the North
    Posts
    4,506

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Excellent writeup; I'm not a financial guy, but I am an English major, and I appreciate well-written and coherent articles.

    I also agree, to the extent I understand it, with everything you have said there. Except for the orange font; it burns my eyes, it burns, preciousss...
    Quote Originally Posted by Atrahasis View Post
    Ours is not to reason why, ours is but to glue and buy.
    Quote Originally Posted by FraustyTheSnowman View Post
    Anything else I have to say has already been said by Col Shaw...listen to the lego man, he's wise.
    "Ember of Dreams"
    http://www.amazon.com/Ember-Dreams-C...0408773&sr=1-1

  8. #8
    Veteran Sergeant
    Join Date
    Jul 2007
    Posts
    134

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Nice post.

    Not sure if I agree with you that GW would have turned it around once they start growing at the same rate as their segment though, but I may have misinterpreted your intention. While it is unlikely, they could easily pursue growth, but whether it is profitable for them to do so would be another question, just by halving their prices from what they are right now.

    I'm just not sure what their margins are at this point, and if the demand is elastic enough. I would assume that GW would have crunched the numbers at some point of time and found that reducing the price would not swing enough sales to increase the overall revenue.

  9. #9
    Chapter Master Reinholt's Avatar
    Join Date
    Sep 2007
    Location
    New York, New York
    Posts
    2,096

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Quote Originally Posted by Whitesun View Post
    I'm just not sure what their margins are at this point, and if the demand is elastic enough. I would assume that GW would have crunched the numbers at some point of time and found that reducing the price would not swing enough sales to increase the overall revenue.
    I would not be so quick to make that assumption... see my point about management and lack of business knowledge.

    I am relatively certain they have not, and don't have the expertise to properly test this to determine it even if they tried.


    Quote Originally Posted by Ultimate Life Form View Post
    I must say, I'm not financially minded but you have a habit of writing very understandable, without throwing around complicated words (especially problematic for non-native speakers) and you give good examples to illustrate it, too, so reading all of this was far less painful than you seem to think. Actually I enjoy all of your posts. While it is true that everything on the internet should be taken with a grain of salt, what you say usually sounds very reasonable. I can see no obvious flaws in your reasoning, so I'm inclined to trust you. Now hopefully you didn't hide any fineprint in your post so I'm obliged to buy some garbage from you now in exchange for your financial analysis.
    Ha! I actually don't deal directly with any retail money at work (only banks and institutional investors), so I couldn't even sell you something if I wanted to. However, I've always been of the belief that one of the biggest problems in finance is the drive to sell. You should drive to create value; that sells itself. I'm going to get off track quickly here so I will stop, but let's just say I'm not okay with selling for the sake of selling when there is asymmetric information in finance.
    Quote Originally Posted by Arkfatalis View Post
    I reckon we should start a facebook group where we encourage people to buy £20 of GW shares and then elect Reinholt as head of GW, so it will last forever !

  10. #10

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Quote Originally Posted by Whitesun View Post
    I would assume that GW would have crunched the numbers at some point of time and found that reducing the price would not swing enough sales to increase the overall revenue.
    Well, but it would be a start. At this point I'm not even looking forward to new releases anymore because I know I won't buy them. The only thing consistently growing have been the prices and it should be obvious to everyone that this is not a viable long-term strategy.

  11. #11
    Veteran Sergeant
    Join Date
    Jul 2007
    Posts
    134

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Quote Originally Posted by Reinholt View Post
    I would not be so quick to make that assumption... see my point about management and lack of business knowledge.

    I am relatively certain they have not, and don't have the expertise to properly test this to determine it even if they tried.
    Haha, I actually did consider that GW management elected to ignore pricing as a possible strategy, but that just seems too negligent... but it is GW, so...

    It's odd, but if there are a lot of inefficiencies at GW at the moment, which seems likely if we assume that the management team in place is somewhat weak, then GW is rather attractive from an acquisition standpoint. Clean out the inefficiencies, improve the margins and rationalize the pricing in a more coherent manner, I would hazard a guess that there is still a fair bit of latent demand, just not at the current prices. Dally too long though, and all these demand would dry up as the find alternatives.

    Quote Originally Posted by Ultimate Life Form View Post
    Well, but it would be a start. At this point I'm not even looking forward to new releases anymore because I know I won't buy them. The only thing consistently growing have been the prices and it should be obvious to everyone that this is not a viable long-term strategy.
    I know right, it's kinda depressing. I used to get excited when there was a new launch on the horizon, but for the last several years, I've just deferred buying them straight out, and just wait it out a bit for someone to get bored of it and offload it cheaply on ebay.

  12. #12
    Why is the rum gone? Darnok's Avatar
    Join Date
    Feb 2007
    Posts
    11,797

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    As always with Reinholt, a very informative post that is well structured and a joy to read. Moar please.

  13. #13
    Commander frozenwastes's Avatar
    Join Date
    Feb 2010
    Location
    Canada
    Posts
    911

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Quote Originally Posted by Reinholt View Post
    I would not be so quick to make that assumption... see my point about management and lack of business knowledge.

    I am relatively certain they have not, and don't have the expertise to properly test this to determine it even if they tried.
    I say this as an accountant and former corporate accountant, but I don't think GW's current CFO/COO has those skills. Kevin Rountree started his career with GW as a assistant and has climbed the ladder on the financial side of the business all the way to the top spot of CFO. People who are good at corporate accounting don't do this. They move on regularly and get head hunted regularly. Or they start up their own firms. Or if they're just in it for a secure job, they don't do the corporate climbing thing. They carve out their niche and stay put. The climber types are usually those who are better at company politics than accounting.

    GW's board seems to be full of entrenched lifers. Kirby is acting as both CEO and Chairman. Rountree as both COO and CFO. And of the three independent directors, two have been on the board with Kirby for 12 and 17 years and the last is a new addition with a background in corporate finance. Even Mark Wells' time as CEO was an internal promotion from his sales director position.
    Last edited by frozenwastes; 23-05-2014 at 19:00.

  14. #14
    Chapter Master
    Join Date
    Mar 2005
    Location
    The cold north (also know as Denmark…)
    Posts
    2,596

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Great read as always Reinholt.

    I'm wondering though, about your opinion on the general management of the company. I think we can all agree that it's pretty bad, but what I'm wondering is why?

    I get that they've filled the positions with yes-men, but surely someone, at some point in time, must have stood up and told the management that they don't know what they're doing. Is that not what you hire specialists for? How can, for example, as sales-specialist not look at the last handful of years and go "ummm... guys... something's wrong here...".

  15. #15
    Chapter Master nedsta's Avatar
    Join Date
    Nov 2006
    Location
    Sunny Leeds, where the sun doesn't actually shine
    Posts
    1,417

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Any chance of this being stickied so any future threads of "it woz de shareholders fault" can be shown otherwise?

    Sent from my RM-914_eu_euro1_327 using Tapatalk
    Ned's slow painting log
    Quote Originally Posted by Enkidu View Post
    Your right, and Abaddon really just wants to return the Emperors wallet.
    Quote Originally Posted by Green-is-best View Post
    If Under Siege has taught us anything, and I think it has, it's that the cook is always the deadliest member of any military organization.

  16. #16
    Chapter Master
    Join Date
    Aug 2008
    Location
    Nottingham Prime
    Posts
    4,506

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    At first the original post seemed like it was going to be one of those "I'm slightly taller than average and I know all the crazy reasons why GW is evil" but was pleasantly surprised to see it was actually well reasoned without being overly (nor falsely) elaborate.

    A good read!
    Sent from my Astropath using Tele Talk

    WHFB & 40k FAQ & Errata edit: oh, and Hobbit

  17. #17

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Quote Originally Posted by f2k View Post
    Is that not what you hire specialists for? How can, for example, as sales-specialist not look at the last handful of years and go "ummm... guys... something's wrong here...".
    Many people don't like the prospect of paying someone whose job essentially is to tell them in the face how and why they suck, especially if they're not going to heed their advice anyway.

    What GW now needs is a good court jester.

  18. #18
    Chapter Master IJW's Avatar
    Join Date
    Jun 2006
    Location
    Sunny Devon
    Posts
    9,880

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Another good read on financial matters.

    Quote Originally Posted by Reinholt View Post
    GW is a tiny, tiny fish in the global stock market. To put this in concrete terms: Apple is worth 2,758.92 times as much as GW at the time of this writing. Worrying about GW for most portfolio managers would be like worrying exactly how much change is in your couch while your ferrari is on fire in the driveway. It's literally not worth their time.
    To put that into even more extreme perspective, Apple are arguably one of the least-valued tech companies on the stock markets at the moment.

    For UK residents, let's put it this way - your local supermarket* - Sainsbury, Morrisons, Tesco, Waitrose etc. probably has a higher annual turnover than the entirety of GW worldwide. Not the supermarket chain, just that one store.

    *Not the little high street ones but the big edge-of-town ones.

  19. #19
    Chapter Master ashc's Avatar
    Join Date
    Mar 2006
    Location
    Doncaster, England
    Posts
    7,175

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    I always look forward to orange text, bravo Reinholt.

    Quote Originally Posted by f2k View Post
    Great read as always Reinholt.

    I'm wondering though, about your opinion on the general management of the company. I think we can all agree that it's pretty bad, but what I'm wondering is why?

    I get that they've filled the positions with yes-men, but surely someone, at some point in time, must have stood up and told the management that they don't know what they're doing. Is that not what you hire specialists for? How can, for example, as sales-specialist not look at the last handful of years and go "ummm... guys... something's wrong here...".
    I am also most interested in this now.
    Yeah, we flew our space church across 500 light years to get to this planet taken over by the orks. Now we're going to drop from orbit in buckets and run out and shoot pistols and hit people in the head with chainsaws. Ultramarines!

  20. #20
    Commander frozenwastes's Avatar
    Join Date
    Feb 2010
    Location
    Canada
    Posts
    911

    Re: Games Workshop, Stock Prices, The Future, and Cats Without Sufficient Coffee

    Quote Originally Posted by Ultimate Life Form View Post
    Many people don't like the prospect of paying someone whose job essentially is to tell them in the face how and why they suck, especially if they're not going to heed their advice anyway.

    What GW now needs is a good court jester.
    I don't know how many times I've been brought in as an outside accountant for a company in order to "assist the manager while he fixes the problem." You only bring people in who question what you are doing when you can do it as part of your own leading of the charge to fix the problem. In other words, when you have no choice, but can do so while pretending to be the solution rather than the guy who caused the problem in the first place.

    I'm enjoying working in tax accounting so much more now that I don't have to deal with this type of stuff.

    EDIT: You know, the customer experience position GW posted a while back might be just this sort of position. The person works directly with the CEO to craft a proposal for the board's consideration.
    Last edited by frozenwastes; 23-05-2014 at 19:09.

Page 1 of 56 1 2 3 11 51 ... LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •