Will This Trend Be Bunk or a Bunker for Golf Investors?

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Golf's popularity seems to be waning. I had thought, given the popularity and performance of dynamic athletes such as Tiger Woods and Michelle Wie, that the sport was doing well. But legions of fans don't necessarily mean legions of players. A recent New York Times article by Paul Vitello set me straight.

Check out this data:

• "The total number of people who play has declined or remained flat each year since 2000, dropping to about 26 million from 30 million, according to the National Golf Foundation and the Sporting Goods Manufacturers Association." That's a 13% drop in overall golfing participation.
• "... the number of people who play 25 times a year or more fell to 4.6 million in 2005 from 6.9 million in 2000, a loss of about a third."
• The number of "core players," those who golf at least eight times per year, has slid from 17.7 million in 2000 to 15 million in 2006, per the National Golf Foundation. That's a 15% drop.
• "Between 1990 and 2003, developers built more than 3,000 new golf courses in the United States, bringing the total to about 16,000. Several hundred have closed in the last few years."

What's going on? Well, some talk about the aging of players, with young people today less interested in golf, as well as other outdoor activities such as tennis, skiing, biking, and swimming. Also, it generally takes about four hours to complete 18 holes. Many people just don't have time for that these days.

The implications here are many. For one thing, perhaps you'll find your local golf course less crowded. But if trends continue, it may end up closing. Meanwhile, if you're an investor in any golf-related companies, such as Callaway Golf (NYSE: ELY), you might want to pay extra attention to the popularity of the sport and how your company is weathering the trend. Not every such company will falter. Some may prosper, perhaps by buying faltering competitors. Callaway bought Top-Flite not so long ago, for example.

Also, remember that many companies, while not all about golf, are still significantly dependent on the sport for a big chunk of their revenue. Nike (NYSE: NKE), for example, has a line of golf offerings, while Ashworth (Nasdaq: ASHW) puts out golf apparel. Fortune Brands (NYSE: FO), a conglomerate better known for its distilled spirits, owns the Titleist name.

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