Should You Consider Adding Golf Investments to Your Portfolio?

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As the earnings season comes to a close, I found some time to play golf last week. My game was predictably subpar, but I had a great time, which led me to contemplate golf’s role within an investment portfolio.

There are four notable tournaments held annually in the golf calendar. While The Players Championship is often dubbed the fifth major, Rory McIlroy—who claimed victory in the event last weekend—might argue there’s a meaningful distinction between the “fifth” and the truly major ones.

From April to July is regarded as prime golfing season, which aligns perfectly with summer in the Northern Hemisphere.

Consequently, golf news takes center stage during this period. Last year witnessed a surge in headlines, with half diverging from the sport itself. Scottie Scheffler’s unusual arrest garnered headline news, while McIlroy was caught in controversies over rumored marital issues and some stunning tournament mishaps.

Golf commands attention in the news—a reality that positively influences the sport.

In much the same way that Drive to Survive attracted a new generation of Formula 1 fans while holding the interest of long-time enthusiasts, Netflix’s Full Swing has breathed new life into golf.

I’ve grown to appreciate golf even more lately, perhaps because as a father in my mid-to-late 30s, the lives of professional golfers resonate with me more than that of an 18-year-old zooming around a track.

At its core, sports provide a vehicle for storytelling, and storytelling is something people inherently love. The $400 billion market cap of Netflix serves as a testament to that.

But is it possible to invest directly in golf?

Avoiding Poor Investments: Topgolf Callaway

One way to invest is through Topgolf Callaway, which feels as unpleasant as hitting your drive into the wrong fairway—experiencing one of those massive fades and feeling grateful that no houses or cars are in the vicinity. Much like that errant shot, this company has truly lost its way.

In the past five years, using the pandemic’s lows as a reference, the company’s value has plummeted by 44%. This drop is striking, particularly considering golf’s growth as a socially-distanced pastime during that time, mirroring Netflix’s successful efforts to renew the sport’s image.

If you bought shares at their peak during the pandemic around $34, you’re currently feeling the sting as those investments are now languishing at $6.60.

The name itself hints at the underlying issues.

Topgolf refers to an asset-heavy enterprise that specializes in creating golf driving ranges equipped with advanced technology.

Think of it as a golf-centric version of ten-pin bowling—these venues cater to social gatherings where friends can enjoy food and drinks together. I had a fantastic time at the one in Dubai; however, I wouldn’t classify it as an affordable or repeatable entertainment option.

On the other hand, Callaway is a reputable golf equipment brand with a solid standing in the industry.

Numerous leading players, including South Africa’s Christiaan Bezuidenhout—currently ranked 55^th in the world—are endorsed by Callaway.

While the company likely thought these two divisions would work in harmony, the truth reveals a significant disconnect: one division is rooted in a robust IP business focused on selling golf equipment globally through retailers, whereas the other is primarily about maximizing property ventures for success.

The idea that both areas are united by the commonality of hitting golf balls is a misleading distraction, as demonstrated by their disappointing share performance.

Unfortunately, Topgolf has severely impacted the company’s performance over the years.

Read: Major Ernie Els golf deal for R10bn Zimbali Lakes development

It seems they have finally grasped the reality, announcing a plan in late 2024 to separate Topgolf and Callaway into distinct entities by 2025.

This separation is overdue, especially in light of recent data from Topgolf indicating a downturn in same-venue sales, projected to decline in the mid-single-digit range this year. EBITDA [earnings before interest, tax, depreciation, and amortization] is expected to stabilize mostly due to one-off items, with adjusted EBITDA anticipated to reflect a decrease.

Ultimately, Topgolf needs to enhance its affordability to improve capacity utilization; this will likely be a tumultuous journey.

There’s a crucial lesson in being wary of investment thesis expansion.

The notion that “golf is growing and the fundamentals are sound” does not seamlessly align with the belief that “a golf-themed amusement park will prosper”—the choice to engage in the sport seriously is distinct from simply enjoying a good time at Topgolf.

This brings us to a pure-play investment in which I currently hold a long position.

Acushnet: Time to Tee Off

Acushnet’s stock ticker is $GOLF—pretty self-explanatory.

Their operations remain focused solely on golf; unlike other companies, they refrain from branching into unrelated ventures. Over the past five years, their stock has surged by an impressive 170%, translating to a compound annual growth rate [CAGR] exceeding 22% annually. Now, that’s noteworthy.

You might be questioning why you haven’t spotted Acushnet on a golf ball, cap, or shirt. What’s up? You probably haven’t because Acushnet itself isn’t the prominent brand. But the name Titleist? That rings a bell, right?

Ever heard of the Pro V1 ball? It epitomizes dominance: on professional tours worldwide, the Pro V1 is utilized nine times more than its nearest rival. That’s truly remarkable. Golf content creators often reference the lengths they would go to retrieve a Pro V1 from a hazard.

Read: Cape Town needs rational thinking on appropriate land use

Unfortunately, if you’re looking for the clubs used by Scheffler and McIlroy, you’ll need to reach out to the private equity owners of TaylorMade, which was spun off from Adidas several years back.

Nonetheless, with Acushnet, you can acquire Titleist clubs that many professionals use, even if they aren’t regarded as the absolute best.

Read: Why does it cost golfers R18,000 to get a good driver these days?

Additionally, their Scotty Cameron putters are legendary in performance on greens globally—even earning their own meme-worthy status. FootJoy also offers reliable apparel, which I can personally recommend.

Their model is straightforward and consistently yields strong returns.

In 2024, sales increased by 4% in constant currency, while adjusted EBITDA rose by 7.5%.

What does the future hold? With figures like Bryson DeChambeau, a social media sensation and outstanding golfer, alongside enthusiasts like [Donald] Trump, who is an avid golfer, there’s considerable growth potential in the US.

Acushnet touts some incredible statistics: US golf rounds increased by 2% in 2024, reaching a new record in dollar value. Additionally, the number of golfers grew by 7%. Notably, this net increase represents the largest single-year jump since 2000, ushering over three million newcomers into the sport.

While conditions abroad may be less favorable, impacting affordability, the US market—with its robust spending power—continues to rise.

As we gear up for the Majors season, I’m contently holding my position in Acushnet. I anticipate this sentiment will carry me through this season and beyond. By the way, it’s currently trading with a price-earnings ratio [PE] of around 20 times—consistent with the three-year average—following a 7.9% dip this year, aligning with the broader correction in the US market.

Perhaps now is the ideal time to bolster my holdings ahead of the upcoming season!

The Value of Focus

Above all, the main takeaway is that if you’re passionate about a specific theme, hunt for a dedicated pure-play example. Exercise caution when investing in something that evidently lacks a strategic focus.

The contrasting experiences of those who invested in Topgolf Callaway versus Acushnet provide a compelling illustration of this principle.

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