The April Fool

Written by GSCR Staff   
Tuesday, 01 April 2014 08:06

In Monday’s Goldman Guide we got on our soap box a bit to talk about our country, our freedoms, and what to do about it.  At the end of the day, we the people need to take a stand and not rely on the government for everything and get involved.  Complaining about it will change nothing. Good thing we have sports and stocks to buy in the sports world.

Along those lines and on a lighter fare the same goes with professional sports.  Detroit Tigers’ slugger Miguel Cabrera signed a 10-year deal for nearly $300 million late last week.  We are free market capitalists here, and do not blame the player himself, but when does it end?  Getting paid $30 million per year to hit a baseball is sickening.  But again, we have no one to blame but ourselves and we are as guilty as anyone of watching sports on TV and going to games.  So either embrace it or quit watching.

Quitting cold turkey this time of year is almost impossible.  As we have mentioned in prior years, the next five weeks is arguably the best time of the year in sports.  NCAA basketball final four, the start of MLB, the playoff push in the NBA and NHL, The Masters, and capped off with the Kentucky Derby on the first Saturday in May.  Maybe we will quit watching next year!

So where is this going in our small cap world?  In late May 2013 we highlighted Calloway Golf Company (NYSE – ELY - $10.22) in the Market Monitor and it has steadily climbed 50% since then and is setting new 52-week highs.  The stock has been on a steady accumulation run over the last three months with a 21% rise in price with nearly 1 million shares traded per day.  Additionally, the Daily Moving average is solidly very bullish for the 50 day signal.  We believe ELY will continue this momentum trend to the $11 level over the next month and a half.  2014 could be a really great year as well, as the harsh winter may have a positive impact on revenue as golfers look to get out and play and update equipment.  A 7% jump in top line revenue to $900 million in 2014 may be conservative with this consideration, putting the forward P/E even lower than the current 24. 

Our price target for 2014 of $13 for ELY could be reached sometime in the fall.

 

Enjoy the games!  Have a great day!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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