Changes Afoot at Callaway, Berkshire Bits, and (Yes) Paramount
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Changes Afoot at Callaway, Berkshire Bits, and (Yes) Paramount
A penny for Charlie Munger's thoughts as Berkshire pares back on BYD
Happy Thursday and welcome to our new subscribers!
August was, by far, the best month in the short history of this newsletter — with the number of subscribers more than doubling and some great interactions with readers both here and on Twitter.
Thanks so much to everyone for reading, liking, clicking, sharing, retweeting, and more. Your support means the world to me!
(And, with your help, September might turn out even better.)
All Change at Callaway ⛳️
Busy week for the California-based golf giant:
On Tuesday, Callaway Golf Co. officially changed its name to Topgolf Callaway Brands Corp.
Then, on Wednesday, the company’s ticker symbol switched over from ELY to MODG (which stands for Modern Golf).
Callaway’s decision to highlight Topgolf is a no-brainer. It’s the biggest growth driver for the company as a whole and already looks like a bargain after costing $2.66 billion to acquire in 2021.
Topgolf topped $1 billion of revenue last year — and could account for more than half of Callaway’s total earnings as soon as 2025.
And, of course, the TravisMathew apparel brand continues to be a rocket ship in 2022:
🇨🇦 Launched in third international market (Canada)
🏌️♂️ Opened a permanent storefront at iconic St. Andrews Links in Scotland
👩 Debuted new womenswear collection in May
TravisMathew projects 200-300% annual growth for its womenswear segment over the next four or five years.
Okay, now for a nitpick or two.
I’m all for the name change in theory — and Topgolf certainly deserves top billing — but Topgolf Callaway Brands sounds a little clunky.
The ticker change is a little odd, too. I like the nostalgia of ELY — named for company founder Ely Callaway Jr. — and MODG seems a bit out of left field.
Was TOPG already taken? Or TCAL?
“Ticker symbols are meant to be memorable,” said Casey Alexander, an analyst with Compass Point Research and Trading. “It used to be an incredible badge of honor to have a single-letter ticker symbol. U.S. Steel — X. AT&T — T.
“I think the modern golf — MODG — that is a tougher symbol,” continued Alexander. “While I understand that is the space that (Callaway) believes that they occupy now, it is not a well-defined space.”
Agreed.
But… In Chip I Trust.
Berkshire Bits
Some odds and ends out of Omaha…
Bailing on BYD? Back in July, 225 million shares of BYD popped up in Hong Kong’s market clearing system — an amount eerily similar to Berkshire’s stake in the Chinese electric vehicle and battery maker.
Some saw this as a precursor to Berkshire exiting BYD entirely, while others dismissed it as an innocuous filing meant to convert paper stock to electronic.
Well, we now have a (partial) answer.
Since mid-July, Warren Buffett and co. sold 18 million shares of BYD — reducing Berkshire’s stake from over 20% to 18.87%.
No clue whether he’s just taking profits or preparing for a full exit.
A penny for Charlie Munger’s thoughts as Berkshire pares back one of his favorite holdings.
Abel Successor. Writing about Greg Abel — and whether or not he should use his BHE windfall to buy more Berkshire stock — led me to think about the difficulty that any company faces when a longtime leader makes way for his or her replacement.
And that goes double (or triple) for a larger-than-life icon like Warren Buffett.
No matter how much planning and forethought goes into any eventual transition, there’s always some part of it that remains a leap of faith. One that cannot be taken until the old figurehead has departed the scene.
Walt Disney wrestled with this very problem in 1966 — which, unbeknownst to him at the time, was the last year of his life.
When asked about the future of his studio, Walt replied: “As well as I can, I’m untying the apron strings — until they scream for help.”
That seems to be the Buffett approach, as well.
Over the last decade or so, he’s been “untying the apron strings” by empowering the likes of Greg Abel, Ajit Jain, Ted Weschler, and Todd Combs to handle an ever-increasing share of the Berkshire workload.
(In 1966, Buffett actually bought 5% of Disney for his partnership after traveling out to Burbank to meet Walt and discuss the studio’s future prospects. I wonder if the topic of succession plans ever came up…)
Buffett-isms. Okay, this one’s kind of a stretch. But I enjoy seeing — and highlighting — examples of Warren Buffett’s simple principles expanding out into the wider world of business.
And, in this case, into the arena of European soccer.
AS Roma general manager Tiago Pinto sounded downright Buffett-like when discussing his negotiating style during the summer transfer window:
“I am a bit German in the way I do business. I do not like to spend a month negotiating over two or three million euros. They set their price and I decide whether I have the money or not. If I don’t, I move on.”
The Perpetual Plight of Paramount
Seeing PARA 0.00%↑ inexplicably plummet to new lows doesn't even faze me anymore.
After a long holiday weekend, Paramount stumbled out of the gates on Tuesday morning and hit a 52-week low of $22.18.
For a brief moment, it even looked like the company’s dividend yield (4.3%) and TTM p/e (4.5) might cross streams.
In happier news, Alan Soclof of The Crossover made another stirring case for the company that sums up its unique combination of media assets — and forward-looking strategy — better than anyone else.
Simply put — Bob Bakish & Tom Ryan (CEO of Paramount Streaming) are zigging while everyone is zagging, executing beautifully, and creating significant value regardless of what the market has to say.
That reminds me of Jim Lebenthal’s point, made on CNBC after Q2 2022 earnings, that Paramount beat on everything that matters. Paramount+ subscribers increased by 4.9 million, Top Gun: Maverick spurred a 126% jump in filmed entertainment revenue, and the legacy assets keep hanging on and throwing off cash.
Not to mention the rollout of P+ in international markets.
The news is good and the stock keeps sinking.
¯\_(ツ)_/¯
No matter. I’m happy to enjoy the appetizer of a 4% dividend until Mr. Market sees fit to wise up and serve the main course of share price appreciation.
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Disclosure: This is not financial advice. I am not a financial advisor. Do your own research before making any investment decisions.