Encouraging SignsApril 23, 2018

Why golf stocks have been faring particularly well of late

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You've probably noticed at some point recently (or maybe you haven't), but the stock market has been killing it for the better part of the last 10 years. The S&P 500 Index has more than doubled since its lowest ebb in 2009 following the sub-prime mortgage crash, closing at an all-time high at 2,872 back in January.

That trend has been starting to slow recently, as investors fear the end of this bull market run. Yet there's one small group of stocks that continue capturing the affection of Wall Street.

And those are the golf stocks.

At the close of trading on Friday, Callaway (which trades under the symbol ELY) had spiked 15 percent over a three-month period while Titleist's parent company Acushnet (trading under GOLF) was up 10 percent. The S&P 500 Index, by contrast, was down almost 6 percent over that time.

Most analysts have "buy" ratings for both stocks, and their performance has been so impressive that CNBC's Jim Cramer even devoted a segment to them on his show "Mad Money," lavishing praise on the two and going so far as to call the group a "burgeoning bull market."

Why? There are a few reasons.

The return of Tiger Woods is one obvious factor. As golf people like to say: Tiger, even at 42 years old and 10 years removed from his last major win, doesn't just move the needle in golf. He is the needle. His return has brought golf back into the spotlight in a way it simply wasn't before, a lift that has filtered through the golf industry and beyond. Indeed, he's partially helped stabilize Nike's performance over the past three months, despite a surge in rival Adidas' stock and an ongoing review of the company's workplace culture.

But while the 'Tiger Woods saves the day' story is an easy explanation, there are more fundamental factors at play that deserve most of the credit.

Callaway is up 74 percent over a three-year period and Acushnet is up 35 percent since its IPO price in late 2016, not specifically because of Tiger. They've been performers because in a market in which many investors fear is getting too "frothy," they like what they've seen from these two companies' numbers, pure and simple. Callaway have been on a streak of strong earnings beats in both the third and fourth quarter thanks to a 20-percent sales lift over the past year. Acushnet, for its part, reported a 9.5 percent year-over-year growth to its Titleist golf balls in its own fourth-quarter earnings.

The growth is supported by an encouraging uptick in overall equipment sales as reported by golf research firm Golf Datatech, including a 23-percent increase in woods sales (in dollars) in March year-over-year, and a 46-percent increase in wedges.

Talk to your stock broker for advice about what will happen next—we're sticking to offering golf advice around these parts (hey look! Some handy short-game tips!). But the recent run is no doubt good news for the industry at-large.


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