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Adib Motiwala
Adib Motiwala
Articles  | Author's Website |

Value in action : GameStop Corporation

In March 2010 while I was completing my MBA, I started learning about equity analysis and research. I wrote a couple of reports and sent it to a bunch of people (all my friends and some people in the buyside). This report on GameStop (NYSE:GME) was one of my first reports. Most people on the buyside did not care for the idea and they said it was a value trap and would be the next BlockBuster (or Barnes and Noble).

Only one person took interest in the idea. I don't want to name him but he is one of the Gurus on this website. He encouraged me a lot and asked me to continue working hard, reading a lot of 10Ks and writing research reports. I asked him how I could get a job in the industry, and he said you need to develop some expertise in a sector ideally. He recommended I start a blog, share my research and get feedback from others. I asked him about starting an investment advisory business, and he said you need to take the Series 65 exam, register an LLC, and then you can start your own business.

It's a little over a year since that meeting with him. I have tried to follow his advice as much as I could. I have read a lot of blogs, investment books, research reports. I have read 10Ks and written a bunch of research reports. Importantly, I have also invested my savings into my research because that is where the real learning comes in. I have followed the companies quarter after quarter and tried to see where I was wrong in picking a company.

I took the Series 65 exam last December, registered my company Motiwala Capital LLC, and applied for my Investment Advisor license. A few weeks back, the Texas State of Securities Board approved my registration as an Investment Advisor. I am now open for business!! While I am nowhere close to being a 'Guru' investor, I am certainly learning everyday and applying what I learn. It is a long road ahead.

I wanted to thank everyone who encouraged me in the journey so far.

Here is the research report that started my journey.

GameStop Equity Research Report

Disclaimer: I, and account(s) that I manage, have a long position in shares of GME at the time of writing this article. My position may change at any time. This is not intended to be used as investment advice or a recommendation to buy /sell shares of any securities discussed in this article. Please do your own research or contact your financial advisor.

About the author:

Adib Motiwala
Adib Motiwala is a Portfolio Manager at Motiwala Capital LLC, an investment management firm that manages separate accounts for its clients.

Visit Adib Motiwala's Website

Rating: 3.4/5 (7 votes)


Adamcz - 6 years ago    Report SPAM
In what year do you think the first major console with no optical drive will ship? Or do you think it will never happen, and we'll always print 1s and 0s onto plastic and ship them by truck? I consider it a certainty that we will download close to 100% of our media at some point in my lifetime, but I guess you're disagreeing?
Balajisridharan - 6 years ago    Report SPAM


Good luck with your LLC.

I like the way you have analyzed GME... @ $19, it had loads of margin of safety... (50%+ from my back of the envelope calculation) A high ROIC coupled with a low PE generating a good margin of safety.

I too think that the fears are overblown on cloud...

@27 I am not sure. I have not looked deep enough but I did not see any big catalyst to take it to a lot higher....

Do you see any more catalysts now that you had not seen a year ago?
Bill Smith
Bill Smith - 6 years ago    Report SPAM
Congrats, Adib! Good luck to you!
John Emerson
John Emerson - 6 years ago    Report SPAM


You will find as you proceed in value investing that many of your best ideas will be contrarian in nature; that is a good thing. Too much of Wall St. looks upon stock selection a "popularity contest". Popularity is fine in the short term and being among the consensus is certainly soothing to the psyche, however most of the money is made on the other side. Good Luck JE
Alex Morris
Alex Morris - 6 years ago    Report SPAM
Great job Adib, keep it up!
Adib Motiwala
Adib Motiwala - 6 years ago    Report SPAM
Thanks everyone for the kind words.


I think the current consoles should have atleast 2-3 years of life left. Given that Kinect came out for XBox and Sony move.

In terms of catalysts, I think the growth in the digital sales is one of the catalysts. Apart from that, continued share re-purchases/debt reduction, 0 square feet growth in US, recovery of margin in Europe retail stores are some of the catalysts.

GME is gaining market share even now and the company trades at a low P/E and FCF multiple. Has a solid balance sheet.

I am LONG GME till I see some reason to sell.
Adamcz - 6 years ago    Report SPAM
Ok, so the current consoles have 2-3 years left, and let's assume the next generation lasts 5 years and contains optical drives. That means GameStop can survive 8 more years.

What about after that? Why should they continue to exist 10 years from now, and what will their business model be?
Adib Motiwala
Adib Motiwala - 6 years ago    Report SPAM
I am expecting them to figure it out. If you have noticed, their digital sales have been growing like 'weeds'. Up 50% for the quarter. They expect $1.5 billion in Digital sales by 2014. Also, they have Kongregate, Spawn and Impulse as further engines of growth.

We will see. Things are changing pretty fast in this industry as well. But, for now GME continues to keep its market share and grab some.
Adamcz - 6 years ago    Report SPAM
Marketshare is meaningless if the market won't exist at all 10 years from now. You don't want to have 50% marketshare in horses when the automobile is invented.
Adamcz - 6 years ago    Report SPAM
Fast forward one quarter from the time this thread was written, and earnings are down 23%. Go ahead and give me some more one star votes.
Adamcz - 5 years ago    Report SPAM

I like to bump this thread from time to time because of all the 1-star votes I got for pointing out that Gamestop probably won't exist in 10 years.

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