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 Amer Sports Inc. (NYSE:AS) 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 professional golf player on the green, demonstrating the brand’s quality in golf products.
Amer Sports Inc. (NYSE:AS)
Average Upside Potential: 10.13%
Number of Hedge Fund Holders: 14
Amer Sports Inc. (NYSE:AS) is a global group of the world’s most recognized and respected sports and outdoor brands, including Wilson, Arc’teryx, Salomon, Atomic, and Peak Performance, focusing on premium sports and outdoor products, catering to athletes and enthusiasts across various sports, including golf. Wilson, in particular, is a major player in the golf industry, producing high-quality golf equipment like clubs, balls, and accessories. Although it produces golf equipment, the primary recognition is for products in tennis among others.
In the second quarter of 2024, the company achieved significant revenue growth, increasing by 16% to $993.80 million. This growth was driven by robust performance across all segments, with Technical Apparel revenue increasing by 34%. Outdoor Performance revenue grew by 11%. While the Ball & Racquet Sports segment saw a modest 1% increase year-over-year. Adjusted net income increased by 129% to $25 million, or $0.05 diluted earnings per share.
In the earlier days of October, the company reported a significant growth in Greater China during the recent Golden Week holiday. CEO, James Zheng, highlighted this strong performance during investor meetings in Shanghai. Golden Week, a major shopping period in China, saw Amer Sports Inc.’s (NYSE:AS) revenue surge over 60% year-over-year. This growth was driven by increased sales at Salomon, Wilson, and Arc’teryx stores. The company remains optimistic about the long-term growth prospects in China, particularly in the outdoor segment, which has shown resilience despite broader economic challenges.
Amer Sports Inc. (NYSE:AS) exceeded expectations across key metrics in Q2. The company’s premium brands, particularly Arc’teryx, continue to drive significant growth and profitability. With a robust product pipeline and disciplined financial management, it is well-positioned for continued success in the future.
Overall, AS ranks 6th on our list of the 8 best golf stocks to invest in according to hedge funds. While we acknowledge the growth potential of AS, 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 AS 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.
