2 Ways To Profit From Wall Street’s Favorite Game
Anthony Scaramucci, Lloyd Blankfein, David Tepper, Steve Cohen and countless other Wall Street elites love the game. Off the street, it’s similarly well known as the sport of the rich and powerful. But that’s not to say they’re the only ones playing it.
#-ad_banner-#Despite rumors of its demise, golf is still embraced by players of all incomes. There are over 14,000 playing courses in the United States alone, and the game creates nearly $70 billion in annual revenue. Two million U.S. jobs in the industry support the country’s 25 million active players.
Make no mistake, participation rates have declined since its heyday. However, domestic numbers are steadying and could be headed for another boom in the years to come as more baby boomers reach retirement age.
These new retirees will enter their golden years seeking to spend more time and money on their pastimes. With golf already an established game across the spectrum of society, it will be the beneficiary of this demographic shift.
2 Ways To Play’s Golf’s Resurgence
1. Callaway Golf (NYSE: ELY)
The only pure golf play on the list, Callaway is in the midst of a comeback, creating an ideal investment opportunity. With a market cap over $1 billion, Callaway Golf is best known as a manufacturer and marketer of golf clubs, golf balls, golf bags and other golf-related accessories.
After being knocked substantially lower in the Great Recession, Callaway has been aggressively reinventing itself in the face of a changing retail landscape. These efforts have been well rewarded, with 8 out of 10 of its most recent quarterly reports reflecting solid revenue growth. With several large competitors dropping out of the market, Callaway is well-positioned to ride golf’s global resurgence.
The company’s improved performance was reflected in the latest quarter’s results, which showed an astounding 135% year-over-year operating income increase to nearly $50 million. Net sales have also followed the trend by moving higher 24% year-over-year to $300 million. Both revenue and EPS guidance for the rest of 2017 increased during the quarter.
As the leading company in the industry, I expect Callaway’s successes to continue for quite some time.
2. Dick’s Sporting Goods (NYSE: DKS)
Most people think of Dick’s like an all-around sporting goods chain supplying a wide swath of the sporting lifestyle. While this is true, few people know that the company also owns Golf Galaxy.
Golf Galaxy is a chain of 98 stores that cater to golfers. Although Dick’s slashed its 2017 profit forecast, it’s undergoing aggressive expansion. The company plans to launch 43 new Dick’s Sporting Goods stores and eight Golf Galaxy stores in the next year.
Financials have also improved in 2017, with net sales for the second quarter up 9.6% to just over $2 billion. However, consolidated same-store sales barely eased higher by 0.1%, against the company’s guidance of a 2% to 3% increase. Second-quarter 2016 consolidated same-store sales increased 2.8%.
Shares plunged to $26 after the profit forecast was cut. Technically, a base is being built near the lows, setting up an ideal buy opportunity for risk-embracing investors.
Risks To Consider: Golf is extremely sensitive to economic conditions. Should the economy start to slip lower, the risk level in golf stocks will increase exponentially. Always use stop loss orders and position size reasonably when investing.
Action To Take: Consider adding one of more of the above golf stocks to your portfolio.
Editor’s Note: A few months ago, a group of millionaires and billionaires gathered in a private conference room 26 miles from Mar-a-Lago to discuss their “Trump Era” investments. And believe it or not, a common theme was to invest in American businesses. 7 companies in particular stood out… Full story here.