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Posts with tag AdamsGolf

Are golf stocks a good bet for a troubled economy?

Posted Apr 23rd 2008 5:40PM by Zac Bissonnette
Filed under: Stocks to Buy

With the generally gloomy outlook for the economy and consumer spending, many investors are looking for "recession-proof" industries and companies: tobacco, gambling, alcohol, and pornography (you have to find something to do if you lose your job!).

But how about golf? The latest issue of GolfWeek asks the question, Is golf recession-proof?

Gordon Dalgleish, president of Perry Golf, told GolfWeek that "We can think of no other consumer-oriented business that is as insulated from the effects of general economic conditions other than beer, cigarettes, and perhaps video games."

Gilford Securities analyst Casey Alexander added that golf is "more recession resistant than other consumer-oriented activities ... A weak economy rarely has much negative impact on overall golf spending, just as a strong economy rarely has a positive effect on overall golf spending."

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Quiksilver sells Cleveland Golf -- Should Adams Golf be next?

Posted Oct 31st 2007 5:05PM by Zac Bissonnette
Filed under: Deals, Management

After more than a month of rumors surrounding the possible sale of Quicksilver's (NYSE: ZQK) Cleveland Golf subsidiary, the deal is done. Quiksilver announced the sale last night, and will collect $132.5 million from SRI Sports, based in Japan.

It's interesting because it's roughly double what industry experts were initially estimating the company would sell for. Back in September, GolfWeek wrote that "Industry sources say Quiksilver Inc., which acquired Cleveland in 2005 as part of a deal to buy ski-maker Rossignol, is in the final stages of unloading the golf equipment maker for roughly $60 million to $70 million. Some analysts say the price is a bargain, noting Cleveland likely is worth at least $100 million, but they add an expedient sale even at a discount is in Quiksilver's best interests."

Recently, I've written about a stock I own called Adams Golf (OTC BB: ADGO), which I believe is very undervalued, in large part because of some corporate governance issues and managerial apathy toward the stock price (which is a good thing in moderation, but Adams may be at the opposite extreme). Using the sale of Cleveland Golf as a guide, I am convinced that Adams shareholders would be rewarded very handsomely if the company's board explored sale options. Take a look at some of the key stats


Continue reading Quiksilver sells Cleveland Golf -- Should Adams Golf be next?

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The BloggingActivist update: Adams Golf's excessive compensation -- for a retired guy!

Posted Oct 18th 2007 4:00PM by Zac Bissonnette
Filed under: Scandals, Activist investing

A few months ago, I wrote a piece about a company that I own shares of called Adams Golf (OTC BB: ADGO). While I was, and still am, very optimistic about the company's potential for providing outstanding returns to shareholders, corporate governance is a significant problem at the company. I strongly believe that there are changes that need to be made to provide shareholders with the best return possible, and I outlined some of the steps I believe should be taken in that post.

One issue that makes abundantly clear the corporate governance problems at Adams Golf is the compensation of its founder and chairman, Barney Adams.

According to the most recent proxy statement, Adams was paid $421,698 in 2006, a pay package that is hardly immaterial in light of Adams' market cap of around $50 million. The footnote explains it this way:


Continue reading The BloggingActivist update: Adams Golf's excessive compensation -- for a retired guy!

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Callaway reports well but guidance fails to appease Wall Street

Posted Aug 1st 2007 6:45PM by Kevin Kelly
Filed under: Earnings reports, Forecasts

Although Callaway Golf (NYSE: ELY) reported solid earnings and upped guidance after the bell, the stock has moved down in after hours trading. The reason for this sell-off, according to press reports, is the fact that the company's new guidance is still below the analysts' consensus for yearly EPS and revenues.

On the quarter, Callaway was roughly in-line with estimates -- they missed EPS estimates by a penny but matched revenue expectations. For the year, Callaway expects to earn 78-84 cents per share, an increase from previous guidance, but still below the consensus estimate of 89 cents per share. The fact that the company didn't up guidance all the way to analyst expectations is nothing surprising in my experience, very few companies actually match expectations in guidance.

As I mentioned in an earlier post, I think the play in golf stocks is Adams Golf (OTC: ADGO). The stock is trading for roughly half Callaway on almost every metric and I'm very bullish on the future of the company's hybrid irons.

Disclosure: Kevin Kelly is long Adams Golf.
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The BloggingActivist: Increasing shareholder value at Adams Golf

Posted Jun 12th 2007 10:24AM by Zac Bissonnette
Filed under: Management, Columns

I would argue that Adams Golf (OTC BB: ADGO) is among the most flagrantly undervalued stocks on the market today. As a company on the cutting edge of golf technology, Adams has had tremendous success with its recent hybrid irons. Since 2002, sales have increased from $38 million all the way up to 2006's total of $76 million. For the first quarter of 2007, Adams Golf saw its sales surge 25% year over year and, in the second quarter, launched its new Idea A3 hybrid iron set, the next-generation in the hugely successful Idea line of products. The company is growing rapidly, and the brand appears to be gaining traction; it's the number-one hybrid on the three major tours combined. Adams has been profitable every year since 2003 and, excluding the recording of a deferred tax asset, it trades at around 15 times 2006's earnings.

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Time to take a swing at Adams Golf?

Posted Jan 18th 2007 12:18PM by Zac Bissonnette
Filed under: Columns

One of my hobbies is looking for seriously undervalued stocks. To accomplish this feat, I sometimes use a stock screener like this one from AOL. Looking for really cheap stocks, I'll sometimes search for companies trading very close to book value with little or no debt and some profitability. Normally, very few stocks meet all of these criteria. The ones that do are almost always boring and nothing you've ever heard of. Finding a brand moat -- a company offering a consistent, well-known, high-quality product -- using these screens almost never happens. That's why I was particularly shocked when I found Adams Golf, Inc. (OTCBB: ADGO) the other night. Before I tell you about it, I should warn you that it is an OTC stock under $5 and is potentially quite volatile.

As any golfer knows, the company is best-known for its line of hybrid golf clubs, several of which received rave reviews in the most recent issue of Golf Digest. For the quarter ended September 30 2006, total sales increased 47% to $15 million. While the quarter showed a net loss of 2 cents per share, for the 9 months ended September 30, the company has fully diluted earnings of 16 cents per share.

The most interesting thing about the company is its balance sheet. The market cap is tiny at $45 million, and the company has $11.7 million in cash according to the latest 10-Q, and a book value of $37.5 million with no debt. The book value consists almost entirely of current assets so it's probably a reasonably good proxy for its liquidation value.

So, Mr. Market is according the business a value of about $7.5 million. Does that make sense? I don't think so. The company is recognized as one of the most innovative golf club manufacturers going, and spends over $2 million per year on research and development. As any deep value investor will tell you, this sort of investment in the future is extremely rare among companies valued this cheaply. The company has a trailing twelve-months price/sales ratio of 0.65, compared to Callaway Golf Company's (NYSE: ELY) ratio of 1.

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