Taking a swing at Callaway brands

More people are playing golf these days, and not just on golf courses.

This is driving strong growth for Topgolf Callaway Brands (NYSE: MODG), which was formed in 2021 by the merger of leading golf entertainment and tech provider Topgolf International with Callaway Golf.

Callaway has been a top brand in golf clubs and balls for a long time, but the equipment business has fallen on hard times lately.

The company saw golf equipment sales decline by 5% year over year in its first quarter, but this was more than offset by double-digit growth at Topgolf.

People go to Topgolf’s 80-plus venues to hang out with friends and hit some balls, and business is booming.

Topgolf reported revenue growth of 25% year over year in the first quarter on top of strong growth last year, and management sees more room for expansion. It’s planning to have 92 venues open by the end of this year.

The growth potential of Topgolf is why the stock looks attractive after falling roughly 50% from its high over the past few years.

Investors are clearly concerned about the weakness in golf equipment, but this segment should bounce back when the economy is stronger.

Topgolf’s stock was outperforming the S&P 500 in the years leading up to the pandemic, and may do it again over the next five years. (The Motley Fool has recommended Topgolf Callaway Brands.)

Ask the Fool

Q. Is the stock market too risky for a teenager? – H.R., Biddeford, Maine

A. Nope. The stock market is one of the best ways to build wealth over the long term, and young people are best positioned to take advantage of that.

If you start investing at age 15, for example, and expect to retire at age 65, your first invested dollars will have a whopping 50 years in which to grow.

The stock market’s long-term average annual growth rate is around 10%, but even if your money grows at 8% over 50 years, that can turn a single $100 investment into nearly $4,700.

There are some caveats, though, which apply to all investors.

First, stock market returns aren’t guaranteed, and it’s easy to lose money if you engage in ill-advised practices – like investing in penny stocks, investing with borrowed money (“on margin”) or day trading.

One of the safest ways to invest in stocks is via a low-fee, broad-market index fund.

Also, any money you’ll need within five or so years shouldn’t be in stocks, because you don’t want to have to sell after a temporary downturn.

Favor money market accounts or certificates of deposit (CDs) instead. Learn more in “The Motley Fool Investment Guide for Teens” by David and Tom Gardner with Selena Maranjian (Touchstone, $17).

Q. What schooling do you need to be a stockbroker? – I.A., Santa Clara, California

A. A college degree is generally required, ideally with a business major.

You’ll need to pass the Securities Industry Essentials (SIE) Exam. You’ll register with the Financial Industry Regulatory Authority (FINRA).

And you’ll need to take and pass the “Series 7” licensing examination – and in most states, the “Series 63” exam as well.

My dumbest investment

I started investing in the early 2000s, and I bought into companies I know – such as Disney, Nvidia, Microsoft and Amazon.com.

I invested a total of about $30,000 in them – only to sell almost all my shares around 2006, locking in my gains.

I thought there was no way those companies could do any better, and I was proud of dodging the stock market collapse in 2008 due to the financial crisis.

However, looking back now, I can say my most regrettable investing move was locking in those gains. – M.W., online

The Fool responds: Your story illustrates an important investing lesson.

We repeatedly urge long-term stock investors to avoid panic selling when the market drops.

Well, in 2008, the S&P 500 plunged nearly 37%!

Indeed, in the bear market that existed from 2007 to 2009, the S&P 500 fell by more than 50%.

That’s enough to make many investors very nervous and to make many of them sell. But look what happened to those who hung onto shares of great companies: The shares recovered and went on to reach new heights.

It wasn’t unreasonable to sell when you did – if you’d lost faith in those companies.

But if you weren’t sure whether they could still grow, you might have considered just selling some of the shares and retaining a smaller position in each stock.