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Cramer spots a 'burgeoning bull market' in golf stocks

  • "Mad Money" host Jim Cramer continues to track the golf comeback by examining the stocks of Callaway Golf and Acushnet Holdings.
  • Cramer attributes the strength in "pure play" golf stocks to good management and rising ratings.

In an increasingly volatile market, what investors truly need to keep their portfolios afloat are sectors with real staying power, CNBC's Jim Cramer said on Monday.

"You know what has staying power here more than almost any group that I know? Golf," the "Mad Money" host said. "I know that golf isn't exactly the pinnacle of excitement. It's not sexy. Some argue it shouldn't even be a sport. The Masters had some massive ratings, though, especially when Tiger Woods was playing earlier in the tournament for the first time in years."

Cramer found the aftermath of the Masters a perfect time to reiterate his call about a key market theme: the comeback in the game of golf and the related strength in golf-related stocks.

Since Cramer started talking about the golf comeback in 2016, two top golf stocks have stood out in terms of performance: Callaway Golf, which makes all sorts of golf-related products and owns a stake in fast-growing driving range operator Topgolf; and Acushnet Holdings, the parent company of highly respected golf brands Titleist and FootJoy.

Shares of Callaway Golf have gained 45 percent since Cramer first recommended the stock in 2016 and 15 percent since he reiterated the call six months ago.

"With Acushnet, I made the mistake of telling you to wait and see six months ago," Cramer admitted. "I should've had more faith in them. Since then, the company has found its footing and the stock has caught fire. It's up a quick 12 percent since the beginning of 2018."

Cramer acknowledged the positive effect Tiger Woods' return has had on the golf business. TV ratings for Woods' events were up over 90 percent year over year, and ticket prices to the Masters surged due to his comeback.

But the strength went beyond one famous golfer, Cramer argued. Callaway just reported two quarters in a row that far exceeded analysts' expectations, taking market share in every region where it operates.

The company's acquisitions of TravisMathew and OGIO have also boosted business, allowing Callaway to be less promotional and raising management's forecasts for 2018.

"Put it all together and I think Callaway still has an excellent story," Cramer said. "To me, the stock seems fairly cheap, [trading at] 21 times next year's earnings estimates [with a] 30 percent long-term growth rate."

Acushnet also reported a major pickup in business in its last two earnings reports. The company held a secondary share offering in November, kicking off a steady climb in its stock.

"Given the performance of the last [secondary offering], I'd be a buyer if the stock gets dinged," Cramer said. "And with Acushnet trading at merely 14 times next year's earnings estimates, this one looks like a real bargain. That said, much uglier balance sheet than Callaway [and] generally a bit of a riskier proposition. I like it here, [but] of course I'd like it at a lower level."

Cramer did have one mea culpa related to his past golf-related stock calls. Six months ago, the "Mad Money" host recommended EPR Properties, which owns real estate that houses Topgolf driving ranges.

To Cramer's dismay, shares of EPR are down 22 percent since he highlighted the stock because of a bankruptcy at one of its charter school tenants and some faulty retail exposure.

"The takeaway is straightforward, though: if you want exposure to the burgeoning bull market in golf, forget the diversified companies with a bit of golf business and just buy yourself a pure play like Callaway or Acushnet," the "Mad Money" host said.

WATCH: Cramer lines up his top picks in the golf space

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