Looking Back at 2011

With the close of the President’s Cup and Tiger’s first win in the Silly Season, it seems appropriate to look back at 2011. These may or may not be the most important stories, but these are the “Things that make me go ‘hmmmm’.”

Sale of Acushnet

Since my day job is that of Securities Analyst and I cover the golf equipment industry, this was clearly a matter of focus and attention. After all, several private equity firms contacted me for consultation about the golf equipment industry and about my opinion of Acushnet. Ultimately, I published the story “Gilford Securities Golf Industry Research: Fortune Brands — Acushnet Sale/Spin-Off”. In my story I came to the conclusion that the best bet in terms of an ultimate buyer was an Asian Private Equity firm. In fact, Acushnet was finally purchased by Fila Korea in partnership with Mirae Asset Private Equity (the largest Private Equity firm in Korea) and the National Pension Service of Korea.

The auction was run by Morgan Stanley and the price of $1.2 billion hit the high end of our expected valuation scale. It would have been interesting to see if the end result had been different of Fortune Brands, the precious owner of Acushnet, had been able to operate under a more extended timetable. Fortune was on a strict timetable that would not allow for any anti-trust objections to the sale, which for all intents and purposes excluded the universe of strategic buyers such as TaylorMade and Nike.

One of the more interesting subtexts to the deal was the strong interest from both U.S. and Asian private equity interests, as well as almost the entire cast of strategic competition. In the process of evaluating Acushnet, these multiple entities have to clear several hurdles. They have to decide that Acushnet is an interesting opportunity, they have to study the golf industry and decide that this is an industry they want to invest in, and they have to believe they have an exit strategy within some reasonable timeframe. That requires a significant investment of time and capital. Once all of these interests have gone through those steps and yet not bought the target, they keep their ears open for other potential ideas within that industry. And that makes me go ‘hmmmm’.

Tiger Fires a Caddie, and the Caddie Fires Back

By now everyone who cares has heard the entire saga of Tiger Woods and Steve Williams. Still, it ranks as one of the most important stories of the year. I was clearly struck with the inaction of the PGA Tour in policing a caddie gone rogue in my story “Steve Williams Should Be Suspended.” It seems a dangerous precedent when the most important asset of the PGA Tour is attacked by someone as unimportant as a caddie, and the caddie is allowed to get away with it with no apparent consequences.

But here’s the thing that makes me go ‘hmmmm’. What makes Steve Williams think he’s so important that he believes that he can get away with it? He simply does not shut up. Even after the improper remark from the caddy dinner, he still feels the need to create another story stating that he should have left Tiger after the Australian Open win in 2009.. Like anyone actually believes that Stevie Williams was ever going to voluntarily give up Tiger Woods bag? Puh-leeeze. Steve Williams was going to hang onto that ride like grim death for as long as he could. But let’s face it. It took a stupid caddy to help Tiger look sympathetic. Thanks Steve.

“I Was Wrong, White Is Right”

If you haven’t seen the white woods produced by TaylorMade in 2011 then you clearly do not own a television. In my 2011 PGA Merchandise Show report, I inferred that the white woods from TaylorMade increased the risk for everyone in the woods business. I thought that if the white woods turned into a white elephant it would cause such a rash of discounting to ram the leftovers through the distribution channel that it would harm the business for everyone else.

Doh! I couldn’t have been more wrong. TaylorMade used their PGA Tour presence to create the impression on televisions that we were watching the TaylorMade Tour. Sales of white woods exploded, market share expanded, and my shame grew to the extent that on a late-year trip to California I presented CEO Mark King with the hat you see below:

Needless to say, the 2012 product year should provide some entertainment as TaylorMade tries to follow in some pretty big footsteps.

The U.S. Open?

Most will think of the 2012 U.S. Open and think of the brilliant performance from Rory McIlroy. And it was brilliant. It just wasn’t the U.S. Open, it was more like the Kemper Open. The scoring was so low and the course provided such a meager challenge that I shudder to think what the USGA will do to the course next year to make up for it. If you like to see professional golfers struggle, then mark your calendar for June 2012 at The Olympic Club in San Francisco. I suspect the course is going to be brutal.

Tiger Beats All Seventeen of Them

Tiger is in the Winner’s Circle again. Of course, he won his own tournament and there were only seventeen other players there, but hey, a win is a win.

Everybody Into The Pool

By finishing fifth out of 45 entries in my yearly golf pool, I believe I proved that I have significant expertise when it comes to analyzing the potential of PGA Tour players.  At least that’s the story I’m going with. Conjecture aside, the facts say otherwise. With the help of my readers, I landed on Golf Fantasy Player of the Year Webb Simpson, who provided a 6:1 payback on dollars invested. With three players that failed to earn even $100,000 on the year, some levels of judgment have to be regarded with a skeptical eye.

Mike Weir? A disaster. Jamie Lovemark? A rookie with an injury. But the real shocker was Michael Sim. Sim cost me $1.4 million and brought back a mere $47,000 after a terrific year in 2010. All three were damaged by injuries. I had only budgeted for one season ending injury. Sigh.

Fifth place was out of the money, but side action more than covered my entry fee, so I will go after the pool in 2012 with gusto!

Looking Ahead to 2012

No doubt there is a lot to look forward to in 2012.

The Tiger in the Room

Tiger has already been installed as the favorite at the 2102 Masters. Last year, I targeted my golf pool side bets towards those who were putting Tiger on their team. It worked beautifully, as I cashed every side bet I made. But I certainly doubt that will work in 2012. Tiger looks, healthy, fit, and most of all, his swing and his game look under control. I figure he makes at least $2.5 million without winning an event, and considerably more if he starts winning.

As far as how Tiger is perceived by history, this may very well be the most important year of his career. America loves a comeback story. The fall from grace, the time spent in the valley, the long climb out only to re-emerge at the summit again. The story line is simply irresistible. The television ratings will be off the charts if Tiger hits the Winner’s Circle in a major this year.

Acushnet’s New Owner

As we discussed, Acushnet was sold during 2011 to Fila-Korea. Only a fool would seriously consider messing with a formula for success that has worked for the last couple decades. But as obvious as that may seem, I have seen companies do just that.

The leadership of Acushnet is the same, so major differences are unlikely. But if it starts to happen, it will be readily apparent to many in the golf equipment industry. And the competition will be licking their chops to get at some of that dominant market share enjoyed by Acushnet in the golf ball business.

The Amateur Invasion

In 2011 we saw several amateur golfers have more impact on the professional game then they have in years. Harris English, winner of a Nationwide event, has turned pro and earned his Tour card. Patrick Cantlay has returned to UCLA, but his presence is likely to be felt again. Former U.S. Amateur Champion Peter Uihlein begged off of some of Oklahoma State’s fall events after a jam-packed schedule this last summer. But these young guys are fearless and can flat-out play. They will be heard from, you can bank on it.

The Year of the Belly Putter

If one thing can be counted on, it’s that the general golfing population will gravitate towards equipment that is deployed with success on tour. On that score, we can count on 2012 to be a year where sales of bell and long putters is going to be very strong. Young Tour guns such as Webb Simpson and Keegan Bradley have shown that you don’t have to have the yips to matriculate to the longer putters. Once you start to make some putts, ugly gets pretty in a big hurry.

This will be a case where the strong get stronger. Odyssey (a division of Callaway Golf), Ping, Scotty Cameron (a division of Acushnet) and TaylorMade are best positioned to take advantage of this trend. That’s because belly and long putters have to be custom fit to each players body size to be effective. Therefore the inventory investment necessary to exploit the market can only be sustained by the larger companies in the golf equipment business. The larger equipment companies are also more capable of training the distribution channel in the custom fitting process. It also helps to have brand name identification and Tour validation.

Rounds Played Rebound

When I look at the dismal figures detailing rounds played in 2011, it is clearly a sorry picture. But it seems that weather really did have a seriously negative impact on the results here in the U.S. Rounds played were down almost 17% in April, and April generally is the month that kicks off the serious golfing season. The weather in April in the northern geographies was just off the charts bad. In fact, the geographies that have experienced negative weather patterns for the year outnumber those with positive weather patterns by almost 3:1. It’s easy to get discouraged about playing often, when there are so many days where the ability to play is simply compromised. And once you get on another entertainment track, it becomes easier to stay on the alternate path. The good news is that some of the negative weather comparisons for 2012 are almost statistically unrepeatable as compared to 2011. So we are going to go out on a limb and forcast a rebound in rounds played driven by weather that simply has to get better. Pellucid Corp., the industries weather watcher, will start trying to saw the limb off behind us as soon as they read this. Alas, that is the risk of being a prognosticator.

Everybody Back Into The Pool

The 2012 golf pool starts with the Tournament of Champions in Hawaii. Much as I did last year, I am singing out the clarion call for suggestions from my readers for players to put on my team.

The rules are pretty simple. I have $12 million to spend. Players cost the value of last year’s PGA Tour winnings rounded up to the nearest $100,000 (Player A earned $907,000, he costs $1,000,000). All Q School, Nationwide Tour, non-member and players below 125 on the 2011 money list cost $700,000.

Various players have had their cost set by the arbiters of the pool: Tiger Woods $2.5 million, Rory McIlroy $2.4 million, Darren Clarke $1.5 million, Lee Westwood $1.4 million, and Bud Cauley $800,000.

I welcome any suggestions, but please include your reasoning for why I should include the player on my team. After all, I have a reputation to uphold, and important side action that needs to pay for my participation in the pool. Grizzly John and Dan the Cow are not going away.