We recently compiled a list of the 8 Best Golf Stocks To Invest In According to Hedge Funds. In this article, we are going to take a look at where Acushnet Holdings Corp. (NYSE:GOLF) stands against the other golf stocks.
Investing in the Booming Golf Industry
The golf industry has gained immense popularity for various reasons, making it a significant part of global sports culture. According to the National Golf Foundation, golf’s international reach is estimated at 123 million. In the US, over a third of the population aged 5 and older engaged with golf in 2023, a 30% increase since 2016. Its appeal lies not only in the challenge it presents, requiring skill, strategy, and patience but also in the social and recreational aspects it offers. Its inclusion in international events like the Olympics has contributed to its widespread acceptance and growth, attracting diverse demographics across different countries.
As reported by Grand View Research, the global golf equipment market, valued at $7.48 billion in 2022, is expected to grow at a 5.0% CAGR from 2023 to 2030. This growth is fueled by rising disposable incomes, increased golf course development, global golf tourism, and the rising participation of women in the sport. Innovative product development by industry leaders is further driving market expansion. While the COVID-19 pandemic disrupted the market due to global lockdowns, the industry is recovering and is expected to see continued growth.
Following a notable boom in 2020, total golf participation in the US surpassed 40 million for the first time in 2022, highlighting the sport’s increasing popularity, according to NBC Sports Next. Several key trends are shaping the golf landscape in 2024. First, women are playing a pivotal role in driving golf’s popularity, with recent studies revealing that they constitute 49% of surveyed golfers. The National Golf Foundation reported a remarkable 15% increase in female golfers from 2020 to 2022, contrasting sharply with a mere 2% rise among male golfers during the same period.
Additionally, golf has transformed into a social experience, with nearly half of the surveyed golfers indicating they primarily play with friends. This shift emphasizes the communal aspect of the game, which can be leveraged by course managers to tailor marketing strategies and enhance engagement. Furthermore, there is a rising demand for golf lessons, with 36% of golfers reporting they took lessons in the past year, this figure jumps to 67% among GolfNow users, indicating a strong desire to improve skills regardless of competitive aspirations.
Golf stocks can be categorized under consumer cyclical stocks for several reasons. First and foremost, golf-related products and services, such as equipment, apparel, and memberships, are generally considered discretionary items. This means that consumers tend to spend more on these products when economic conditions are favorable. As a result, golf stocks exhibit characteristics typical of consumer cyclical stocks, which thrive during economic expansions and often suffer during downturns. Furthermore, the golf industry often reflects broader consumer trends. Increased participation in leisure activities like golf typically indicates a robust economy. Companies involved in the golf industry in one way or another are directly linked to consumer spending patterns in leisure and recreation, which are key aspects of the consumer cyclical sector. During economic downturns, consumers may prioritize essential spending over discretionary activities like golfing, leading to a decline in revenue for these companies.
On October 23, Jeff DeGraaf, Chairman and Head of Technical Research at Renaissance Macro, joined ‘Closing Bell’ on CNBC to discuss market seasonality and why he thinks it’s a good time for strong returns. He believes that seasonals have set up a nice cyclical trade from now through 2025. Jeff DeGraaf noted that while there is currently limited internal momentum, this should not be viewed negatively, rather, it could signify a consolidation phase.
He highlighted a unique market condition characterized by overbought conditions in both yields and the dollar, which are currently in a downtrend. Historically, when these conditions contract, it tends to be favorable for cyclical stocks. He emphasized that historically, the end of October marks one of the most bullish weeks for the market’s three-month forward returns. Given this confluence of factors, including overbought conditions and seasonal trends, DeGraaf believes there is potential for a cyclical trade to gain traction through the remainder of the year and into the first half of 2025.
Addressing concerns about yields and the dollar, he acknowledged that there is uncertainty surrounding their future movements, particularly with the upcoming elections. However, he maintained that his quantitative measures indicate negative trends for both yields and the dollar. DeGraaf suggested that while some investors may be recalibrating their expectations regarding these factors, the current overbought conditions are likely to subside as the market moves through the fourth quarter.
His overall insights suggest a cautiously optimistic outlook for cyclical stocks as they navigate current market conditions characterized by overbought indicators and seasonal trends. Golf stocks present a compelling investment opportunity as they align with the broader trends of consumer cyclical stocks, thriving during economic expansions. With increasing participation in leisure activities and projected growth in the golf industry, golf-related companies are well-positioned to benefit from rising consumer spending.
Our Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of 15 golf stocks with high analysts’ upside potential. We then selected the 8 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A relaxed golfer in the company’s lifestyle apparel, enjoying a leisurely round.
Acushnet Holdings Corp. (NYSE:GOLF)
Average Upside Potential: 14.05%
Number of Hedge Fund Holders: 21
Acushnet Holdings Corp. (NYSE:GOLF) operates a series of brands that manufacture golf equipment, clothing, and accessories. Brands include Titleist and FootJoy. Titleist is renowned for its high-performance golf balls and clubs, trusted by many professional golfers. FootJoy is a major player in the golf footwear and apparel market, offering a range of products for golfers of all levels. The company is committed to innovation and excellence, continuously striving to provide golfers with the best equipment and apparel to enhance their game.
The recent capital investments are already paying off, with increased urethane capacity and improved efficiency in the ball plants and custom imprint facilities. Titleist Golf Clubs had Japan and EMEA as the key growth markets, while the US market experienced a 7% increase, driven by golf balls, FJ Apparel, and other categories.
The company’s second-quarter net sales reached $683.87 million, a modest 0.80% year-over-year increase. This uptick was primarily attributed to the strong performance of Titleist Golf Balls. Net sales for the first half climbed 2% to $1.39 billion, with Titleist Golf Balls and Golf Clubs being key drivers, growing 7% and 5%, respectively. Notably, Titleist Golf Balls achieved double-digit growth in the US and Korea, even in a competitive market. To meet this robust demand, 3 Golf Ball production facilities are currently operating at full capacity.
It’s optimistic about the future of its golf ball and club businesses. Despite short-term challenges in certain regions due to excess inventory, Acushnet Holdings Corp.’s (NYSE:GOLF) strong brands and product pipeline position it for long-term growth. Key product launches and strategic investments will drive future success and enhance shareholder value.
Diamond Hill Long-Short Fund made the following comment about Acushnet Holdings Corp. (NYSE:GOLF) in its Q4 2022 investor letter:
“New positions initiated in Q4 included shorts International Business Machines (IBM), Acushnet Holdings Corp. (NYSE:GOLF) and elf Beauty (ELF). Acushnet (GOLF) is a leading manufacturer of golf equipment, accessories and apparel. The company owns several top brands in golf, including Titleist and FootJoy. Golf experienced heightened demand as consumers looked for socially distanced leisure activities over the last several years. We expect some of this enthusiasm — especially from newer golfers — to wane over the next couple years and for the average number of rounds per golfer to normalize from a high in 2021. We also believe some demand for equipment and apparel was likely pulled forward.”
Overall, GOLF ranks 4th on our list of the 8 best golf stocks to invest in according to hedge funds. While we acknowledge the growth potential of GOLF, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GOLF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
