Should You Consider Adding Golf Investments to Your Portfolio?

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With earnings season finally winding down, I had a chance to play golf last week. The game was predictably poor, yet I enjoyed myself, prompting reflections on the role of golf in an investment portfolio.

There are four major tournaments each year in the golf calendar. Although The Players Championship is often referred to as the fifth major, I’m sure Rory McIlroy—who just won the event last weekend—would insist there’s a significant distinction between the “fifth” and the four that truly count.

From April to July, that’s the season. This timing coincides perfectly with the summer in the Northern Hemisphere.

As a result, golf news dominates the headlines. Last year, things escalated, with half the headlines diverting attention from the sport. Scottie Scheffler’s bizarre arrest received widespread coverage, while McIlroy faced scrutiny over rumored marital issues and some shocking tournament meltdowns.

Golf generates headlines—that’s a fact, and it positively impacts the sport.

Similar to how Drive to Survive sparked a new generation of Formula 1 fans while retaining interest from veteran fans, Netflix’s Full Swing has done wonders for golf.

Personally, my appreciation for golf has surged recently, possibly because I’m a father in my mid-to-late 30s, which allows the lives of professional golfers to resonate with me more than that of an 18-year-old racing around a track.

Nevertheless, the essence is that sports serve as a storytelling medium, and people deeply enjoy stories. Netflix’s market cap of $400 billion attests to this.

But can you invest directly in golf?

How not to invest: Topgolf Callaway

One option is Topgolf Callaway, which is about as appealing as hitting your drive into the wrong fairway—having one of those massive fades where you’re just thankful there are no houses or cars nearby. Much like that wayward shot, this company has truly lost its direction.

Over the past five years, using the pandemic’s low point as a baseline, the company’s value has plummeted by 44%. This decline is notable despite golf enjoying growth as a socially-distanced pastime, aided by Netflix’s efforts to revitalize the sport’s image.

If you purchased shares at the pandemic peak around $34, you’re now feeling the pain as it languishes at $6.60.

The name itself hints at the problem.

Topgolf, the first part of the name, refers to an asset-heavy business that builds golf driving ranges equipped with various technologies.

Think of it as akin to ten-pin bowling, but tailored for golf—these venues are designed as social spots where you can enjoy food and drinks with friends. I visited the one in Dubai and had a blast; however, I wouldn’t consider it an affordable or repeatable form of entertainment.

Conversely, Callaway represents a well-established golf equipment brand with a strong reputation.

Many top players, including South Africa’s Christiaan Bezuidenhout—who ranks 55^th in the world—are Callaway athletes.

While the company may have thought these two segments complemented each other, the reality is that one segment deals with a strong IP business selling golfing equipment through retailers globally, while the other is essentially focused on maximizing property ventures to succeed.

The commonality of hitting golf balls in both areas is a misleading red herring, as evidenced by the poor performance of their shares.

Unfortunately, Topgolf has significantly dragged them down over the years.

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

They seem to have finally recognized the reality, with a plan announced in late 2024 to split Topgolf and Callaway into separate entities by 2025.

This separation can’t come soon enough, particularly given recent trends at Topgolf showing a decline in same-venue sales. They anticipate down mid-single digits for the year. EBITDA [earnings before interest, tax, depreciation, and amortization] is expected to remain flat due mainly to one-off items. When adjusted, EBITDA will reflect a decrease.

Ultimately, Topgolf must become more affordable to enhance capacity utilization; it will likely be a turbulent process.

There’s a valuable lesson here about being cautious with investment thesis creep.

The belief that “golf is growing and the fundamentals look good” does not automatically extend to a “fun park themed around golf will succeed”—the choice to engage seriously in the sport is different from simply having fun at Topgolf.

This leads us seamlessly to a pure-play investment, in which I have a long position.

Acushnet: Time to Tee Up

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

This is their singular focus; unlike others, they don’t venture into unrelated businesses. Over the last five years, their shares have risen by 170%, representing a compound annual growth rate [CAGR] exceeding 22% annually. Now, that’s impressive.

You might be thinking that you haven’t seen Acushnet on a ball, hat, or golf shirt. What gives? You likely haven’t, since Acushnet isn’t the trading name that stands out. But what about Titleist?

Ever heard of the Pro V1 ball? It exemplifies dominance: on professional tours worldwide, Pro V1 sees usage nine times greater than its nearest competitor. That’s remarkable. It’s become a frequent reference, with golf content creators joking about the lengths they’d go to recover a Pro V1 from a hazard.

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Regrettably, if you’re after the clubs used by Scheffler and McIlroy, you’d need to reach out to the private equity owners of TaylorMade, which was divested from Adidas several years ago.

Nonetheless, with Acushnet, you can obtain Titleist clubs used by numerous pros, even if they’re not the absolute best.

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

Additionally, their Scotty Cameron putters are performance icons on greens worldwide—another meme-worthy product. FootJoy also provides solid apparel, something I can personally endorse.

It’s a straightforward business model that consistently delivers strong returns.

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

What lies ahead? With figures like Bryson DeChambeau, a YouTube sensation and exceptional golfer, and influential individuals like [Donald] Trump, a passionate golfer, there’s significant growth potential in the US.

Acushnet cites some astounding statistics: US rounds increased by 2% in 2024, reaching a record dollar value. Additionally, the golfer count rose by 7%. Notably, this net increase in golfers represents the largest single-year jump since 2000, welcoming over three million newcomers to the sport.

While conditions outside the US remain less promising, affecting affordability, the US market—with its substantial spending power—is on an upward trajectory.

As we approach the Majors season, I’m happily holding onto my position in Acushnet. I suspect I will continue doing so well into this season and beyond. By the way, it’s trading at an approximate PE [price-earnings multiple] of around 20 times—aligned with the three-year average—following a 7.9% drop this year, in line with the broader US market correction.

Perhaps it’s the perfect moment to add to my holdings ahead of the season!

The Importance of Focus

Above all, the key takeaway is that if you have a specific theme you enjoy, look for a dedicated pure-play example. Exercise caution when purchasing something that clearly lacks strategic focus.

The contrasting outcomes for those who invested in Topgolf Callaway versus Acushnet illustrate this point remarkably well.

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