What are we looking for?
My foursome at the Dundas Valley Golf and Curling Club had been hounding me to highlight a golf stock portfolio in this column. Since the U.S. Open is starting next week, Allan Meyer and I thought we would have a look at the sector.
We found 14 companies around the world that manufacture or retail golf products, and we rated them on several metrics.
The first was the price-to-book ratio (P/B). This is the share price divided by the book value, which is the total value of a company’s assets that shareholders would theoretically receive if a company was liquidated. A low P/B means the stock may be undervalued.
We also looked at each company’s price-to-earnings (P/E) ratio. Again, a low number may indicate a firm is undervalued.
Next up was the relative strength index (RSI), one of the most popular technical indicators. It is computed on the basis of the speed and direction of a stock’s price movement. We use the 30-day RSI, which means that if the stock advanced on all 30 days, the RSI would be 100. Conversely it would be 0 if the stock declined on all 30 days. Most technical analysts consider an RSI value above 70 as overbought, and below 30 as being oversold.
Finally, we examined what percentage of analysts had a buy recommendation on the stock, and the total rate of return for one year.
What did we find?
Our list features some names that may not strike you as obvious plays on golf. But look closer.
Ingersoll-Rand Co. is composed of a number of leading businesses, including Club Car golf carts. Eaton Corp. is a global technology leader in diversified power management solutions, and also owns Golf Pride grips. Canadian Tire Corp. Ltd. owns Sport Chek and Nevada Bob’s Golf outlets. Adidas AG owns TaylorMade clubs and balls.
Two Asian names also feature on our list. Japan-based Sumitomo Corp. owns Cleveland Golf, Dunlop and Srixon golf balls. The stock trades below book value, the majority of analysts have buy recommendations on the company, and the P/E is the lowest on our screen.
The worst performing company on our list over the past 12 months, yet with the highest percentage of buy recommendations, is Fila Korea, which owns Titleist, Footjoy and Scotty Cameron putters.
It is said that 80 million people around the world play golf on 40,000 courses. One thing is certain: Asian-based companies will be making major inroads into equipment and clothing.
cap (mil. $)
|Bridgestone Corp.||5108 JP||27,180||33.43|
|Adidas AG||ADS GR||23,346||112.91|
|Sumitomo Corp.||8053 JP||16,580||13.26|
|Dick's Sporting Goods||DKS-N||6,673||54.2|
|Foot Locker Inc.||FL-N||5,340||35.54|
|Puma SE||PUM GR||4,502||299.14|
All currencies U.S. Source: Wickham Investment Counsel, Bloomberg
cap (mil. $)
|Bridgestone Corp.||5108 JP||27,180||33.43||1.7||14.7||50||75||96.9|
|Adidas AG||ADS GR||23,346||112.91||3||32||57||71||42.6|
|Sumitomo Corp.||8053 JP||16,580||13.26||0.8||6.9||51||60||26.7|
|Dick's Sporting Goods||DKS-N||6,673||54.2||4||19.9||59||73||18.4|
|Foot Locker Inc.||FL-N||5,340||35.54||2.2||13||49||90||10.6|
|Puma SE||PUM GR||4,502||299.14||2||71.2||43||24||-8.6|
|Fila Korea Ltd.||081660 KS||612||61.57||1.5||7.2||51||92||-12.4|
|Callaway Golf Co.||ELY-N||505||7.09||1.4||n/a||54||55||24.9|
|Yonex Co. Ltd.||7906 JP||132||5.64||0.4||17||53||0||10.5|