Tuesday, February 14, 2012

Adams Golf-Part One

This is Part One (a re-print from last fall) of my update on one of my largest positions, Adams Golf (ADGF). I've owned this stock since late 2010, and feel that although they haven't done anything earth shattering, they are making progress.  They are growing their brand with some nice product improvements and are doing quite well considering the environment they are facing.

Let's look at the golf industry as a whole:

It's tough right now in the golf world.  Golf is a sport that has always been a "rich man's game" so to speak, and saw a major growth phase in the late 1990's in large part due to the rise of a young golfer with incredible talent (I think you know who I mean).  Suddenly there were many more casual golfers, and the game grew.  Golf courses were being built left and right, and companies like Callaway and Nike Golf saw some big growth.  Now we're in a situation that's a little different.  A lot of those golfers just don't have the discretionary income right now.  Add that to the fact that Tiger Woods has gone through a major slump, which has affected TV ratings and overall interest in the game.

In my opinion, this is a perfect environment for Adams to make inroads into a larger presence in the golf world.  The bigger golf companies are weaker because they haven't been able to pump out the volume of clubs and gear required for them to be profitable.  Adams is small enough and is conservatively managed.  They had some great quality products (#1 in hybrid clubs, which continue to become more popular), and they have introduced some new products with new technology and a nice look to them.  They also picked up the Yes Putter Brand last year for a great price.

They are getting some nice exposure on all three tours with some great players representing their equipment.  Yani Tseng is a 22 years and has seen phenomenal success.  She is the #1 ranked Women's golfer in the world and was the LPGA Tour Player of the Year in 2010 and 2011.  This should help the company with exposure into a lot of categories, and especially with international growth.

I feel that Adams is doing the right things to gain market share (which they are doing), while not overextending the company at an uncertain time for the sport within the economy.  When the economy strengthens, the company should only do better.

In Part Two, I'll look at more recent events and what is driving stock right now.

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