Conglomerate Wesfarmers (ASX: WES) held its Annual General Meeting this week at which the Chairman Bob Every opened by reminding shareholders that it was 99 years since the company first began as a tiny farmers' cooperative in Western Australia. Today the company boasts a market capitalisation of $50 billion, over 500,000 shareholders and revenues of around $60 billion.
Interestingly, at the time of Wesfarmers formation in 1914 the entire population of WA was only 300,000 people – today Wesfarmers alone employs over 200,000 people!
While the population fact is interesting, far more exciting is the following statistic provided by the Chairman (note that the then named Wesfarmers Farming Co-operative first listed on the ASX in 1984):
"A Wesfarmers shareholder who had $1,000 worth of Wesfarmers shares in 1984, who held them, reinvested dividends in more Wesfarmers shares and took part in all capital restructuring initiatives, would now see that investment worth $294,600. And if that original $1,000 investment had been made in the shares of companies that make up the ASX's All Ordinaries Index, it would now be worth $22,700."
It's a truly outstanding return for long-term shareholders in Wesfarmers, particularly when considering what an investor would have earned by investing in the market index.
For investors looking for their own 'Wesfarmers of the future' there are at least two things to bear in mind.
First, a long holding period and early buy-in can be key. Excluding dividends, over the past 14 years Wesfarmers share price is up just 184% which highlights the importance of discovering Wesfarmers back in 1984 when it first listed.
Secondly, the types of enormous returns enjoyed by long-term shareholders in companies such as Wesfarmers, Woolworths (ASX: WOW) and CSL (ASX: CSL) are few and far between. As such, investors who seek to achieve these incredible returns need to work hard to identify these future compounding machines early.