Americans spend approximately $6.2 billion on golf equipment and apparel each year.

Let’s put that number in perspective.

If we take the 7% of Americans that play golf regularly, we find that each golfer spends approximately $300 a year on new equipment in some form or another.

The makers of the world’s best golf equipment know this all too well. Each year they seem to find some miraculous technological breakthrough…they seem find the one little tweak that will garner the ultimate club… THIS is the year their promise will be fulfilled. This is the year I will play like Phil Mickelson.

Equipment makers are playing the finest marketing game of all. And they’re playing it very well. Their greatest weapon: a mediocre swing. They know we strive for the quick fix. We’re looking for a shortcut to superior returns. Instead of spending countless hours hitting buckets of range balls, we’d rather you sell us $1,000 on a set of the latest Mizuno blades. That would sufficiently do the trick.

I fell prey to this very ploy…

I had to buy a set of new golf clubs this last off-season. Not a full set, just irons. My old ones were too light for my taste, and it was time for a change.

It came down to two sets of Titleist irons, one of which was brand new. The other was 15 years older. Below is a basic description of each. Tell me, which would you choose:

Option A:
These irons have an offset design that promotes ease in ball-striking, making it easier to square the clubface at impact, and helps create a more consistent ball flight.

Option B:
These irons have continuity in performance and aesthetics for a fluid transition from long to short irons.

Would you prefer a more consistent ball flight (Option A) or continuity in performance (Option B)? In my opinion, they’re basically the same thing. The only thing that separates one club from the next is most likely the golfer holding it.

I went with Option A — a used set of Titleist DCIs that cost 70 bucks. Though they were the older set, they were $1,000 cheaper.

To me, buying a brand new set of golf clubs makes about as much sense a buying a brand new car. The minute you take it off the lot, it loses a majority of its original value.

Buying golf clubs and cars is no different than buying stocks. Before you spend a dime, you must formulate a ballpark idea of its intrinsic value.

To me, new clubs are not much more than older clubs with inflated prices. Just because an equipment maker finds a new way to rephrase the term “consistent ball flight,” that does not necessarily equate into placing a $1,000 premium on a seemingly replicated asset.

Remember, whether you’re in the market for golf clubs, stocks, or…for arguments sake, let’s say a 1967 metallic silver Porsche 912 that your wife hasn’t properly warmed up to quite yet. It’s not just about buying a great asset. It’s about buying a great asset at a good price.

Until Next Time,
Christopher Hancock
June 8, 2007

P.S.: The U.S. alone has nearly 700,000 miles of aging pipeline and pumping stations. Some of these U.S. systems are over 100 years old. They wear out. Pressure falls. Water leaks out. Cities lose as much as 30% of their clean water supply to leaks alone. And then things like arsenic, human waste particles, chlorine and decayed metal leak in.

With over 55,000 public drinking water systems…about 20,000 public wastewater treatment plants…and around 75,000 dams and reservoirs…in the U.S. alone…you’re looking at a massive infrastructure in need of updating and repair.

While a lot of water-industry infrastructure companies will make a fortune replacing or providing that equipment, the one I’ve pegged for you here could crush all the rest on total shareholder performance over the months ahead.

Christopher Hancock

Christopher Hancock lives and breathes emerging markets. He travels extensively and utilizes his contacts across the globe to recommend the best international investments in the world. After working with Citigroup in Hong Kong on the challenges and opportunities associated with the forthcoming RBM flotation reform, Christopher left many of his friends behind and decided to return to the States to pursue a career in equity research.

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