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Welcome to the Supernatural Stocks Podcast on Moneyweb, hosted by The Finance Ghost—your weekly source for local and global insights for investors and traders.
With the earnings season nearing its conclusion, I found a moment to hit the golf course last week. The game was predictably subpar, but I enjoyed myself, leading to reflections on golf’s role in an investment strategy.
There are four major tournaments each year in the golf calendar. While The Players Championship is often dubbed the fifth major, I’m sure Rory McIlroy—who recently triumphed at this event—would argue there’s a notable difference between the “fifth” and the four that truly matter.
From April to July, the golfing season unfolds. This timing perfectly coincides with summer in the Northern Hemisphere.
Consequently, golf news tends to dominate headlines. Last year saw the situation escalate, with half the headlines detracting from the sport itself. Scottie Scheffler’s strange arrest garnered significant attention, while McIlroy was under fire over rumored marital issues and some surprising tournament failures.
Golf creates headlines—that’s a fact, and it has a beneficial effect on the sport.
Just as Drive to Survive ignited a new wave of Formula 1 enthusiasts while sustaining interest from seasoned fans, Netflix’s Full Swing has positively influenced golf.
Personally, my love for golf has recently intensified, likely because being a father in my mid-to-late 30s allows me to identify more with the lives of professional golfers than with those of 18-year-olds racing around a track.
Ultimately, sports serve as a narrative medium, and people have a profound appreciation for stories. Netflix’s market valuation of $400 billion speaks to this fact.
But is it possible to invest directly in golf?
Avoiding Investment: Topgolf Callaway
One avenue is Topgolf Callaway, which is as appealing as landing your drive in the wrong fairway—experiencing one of those massive fades where you’re just glad there are no houses or cars in the vicinity. Like that off-course shot, this company seems to have lost its way.
Over the past five years, using the pandemic’s nadir as a reference point, the company’s value has decreased by 44%. This decline is striking, even with golf experiencing growth as a socially-distanced activity, thanks in part to Netflix’s efforts to rejuvenate the sport’s image.
If you bought shares at the pandemic peak around $34, you’re now feeling the squeeze as it hovers at $6.60.
The name itself hints at the issue.
Topgolf, the first part of the name, represents an asset-heavy operation that constructs golf driving ranges fitted with a variety of technologies.
Think of it as akin to bowling alleys, but designed for golf—these venues are meant to be social spots where you can enjoy food and drinks with friends. I had a great time at the one in Dubai, yet I wouldn’t deem it a cost-effective or repeatable entertainment option.
On the other hand, Callaway stands as a well-regarded golf equipment brand with a solid reputation.
Many top athletes, including South Africa’s Christiaan Bezuidenhout—ranked 55th in the world—represent Callaway.
While the company might have figured these two sectors complement each other, the reality is that one segment thrives on selling golfing equipment through global retailers, whereas the other essentially seeks to maximize profit from property ventures.
The commonality in striking golf balls in both areas is a misleading distraction, as shown by their shares’ underwhelming performance.
Regrettably, Topgolf has significantly impaired their performance over the years.
Read: Major Ernie Els golfing deal for R10bn Zimbali Lakes development
They seem to have finally acknowledged this reality, announcing a plan in late 2024 to separate Topgolf and Callaway into distinct entities by 2025.
This split couldn’t come quickly enough, especially given recent trends at Topgolf which indicate a drop in same-venue sales. They expect mid-single digit declines for the year. EBITDA [earnings before interest, tax, depreciation, and amortization] is set to remain flat due largely to one-off items. When adjusted, EBITDA is projected to show a decrease.
Ultimately, Topgolf needs to find ways to be more affordable to improve capacity utilization; this is likely to be a challenging journey.
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There’s an important lesson here about being cautious with investment thesis creep.
The assumption that “golf is expanding and the fundamentals look solid” doesn’t automatically translate to “a golf-themed amusement park will thrive”—choosing to engage earnestly in the sport differs from simply enjoying a fun outing at Topgolf.
This seamlessly leads us to a focused investment where I hold a long position.
Acushnet: Time to Tee Up
Acushnet’s stock ticker is $GOLF—self-explanatory.
This is their singular objective; unlike others, they don’t diversify into unrelated fields. Over the past five years, their shares have surged by 170%, representing a compound annual growth rate [CAGR] exceeding 22% yearly. Now that’s noteworthy.
You may wonder why you haven’t seen Acushnet on golf balls, hats, or shirts. What’s the deal? You probably haven’t, as Acushnet isn’t the brand most people recognize. But what about Titleist?
Ever heard of the Pro V1 ball? It embodies dominance: on professional tours worldwide, Pro V1 boasts usage nine times higher than its closest competitor. That’s impressive. It has become a frequent reference, with golf content creators humorously lamenting the lengths they’d go to reclaim a Pro V1 from a hazard.
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Unfortunately, if you seek the clubs used by Scheffler and McIlroy, you would need to contact the private equity owners of TaylorMade, which was sold off by Adidas several years ago.
Nevertheless, with Acushnet, you can acquire Titleist clubs employed by many pros, even if they aren’t the very best.
Read: Why does it cost golfers R18,000 to get a good driver these days?
Also, their Scotty Cameron putters are performance legends on greens around the globe—another meme-worthy product. FootJoy also provides reliable apparel, something I can personally vouch for.
It’s a straightforward business model that consistently yields strong returns.
In 2024, sales grew by 4% in constant currency, while adjusted EBITDA rose by 7.5%.
What’s in store for the future? With figures like Bryson DeChambeau, a YouTube sensation and outstanding golfer, along with influential individuals like [Donald] Trump, an avid golfer, there’s considerable growth potential in the US.
Acushnet mentions some striking statistics: US rounds increased by 2% in 2024, reaching a historic dollar value. Additionally, the golfer count rose by 7%. This net increase represents the largest single-year boost since 2000, embracing over three million newcomers to the sport.
While conditions outside the US may appear less favorable, impacting affordability, the US market—with its considerable spending power—is on an upward trend.
As we near the Majors season, I’m pleased to maintain my position in Acushnet. I anticipate I will continue to do so throughout this season and beyond. By the way, it’s trading at an approximate PE [price-earnings multiple] of about 20 times—consistent with the three-year average—after falling 7.9% this year, in line with the broader US market correction.
Perhaps now is the ideal moment to increase my holdings ahead of the season!
The Importance of Focus
Above all, the key lesson is that if you have a specific theme you’re passionate about, seek out a dedicated pure-play example. Exercise caution when acquiring something that evidently lacks strategic focus.
The differing outcomes for those who invested in Topgolf Callaway versus Acushnet powerfully illustrate this point.
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