Arvind Mallik and Jonathon Fite of KMF Investments presented their thesis on Topgolf Callaway Brands (US: MODG) at Wide-Moat Investing Summit 2025.
Thesis Summary
Topgolf Callaway is a market leader uniquely positioned within the evolving “Modern Golf” ecosystem. Originally founded in 1982, the company today dominates with top-tier brands across golf equipment (Callaway, Odyssey), apparel (TravisMathew, Jack Wolfskin), and experiential venues (Topgolf). Topgolf, which now accounts for 41% of revenue, offers compelling unit economics, delivering 50-60% cash returns and significant venue growth potential, targeting expansion from approximately 100 venues today to over 200 in the future.
Despite impressive underlying economics, MODG shares recently traded at depressed levels around $8 due to a cyclical downturn affecting consumer discretionary spending, especially impacting same-venue sales at Topgolf. Nevertheless, external rankings continue to highlight Topgolf’s strong competitive positioning, notably in categories like fun, atmosphere, and food & beverage, underscoring its sustainable moat. Additionally, Callaway’s golf equipment segment maintains oligopolistic dominance with a market-leading 35% share, benefiting from scale-driven R&D advantages and strong consumer loyalty.
Accounting complexities tied to Topgolf’s REIT financing have obscured MODG’s financials, making the company appear optically more leveraged than reality suggests. Properly adjusting for these nuances, MODG is valued conservatively at approximately $15 per share based on adjusted free cash flow, while a sum-of-the-parts analysis yields a valuation exceeding $23 per share. Catalysts expected to unlock this value include the planned separation of the Topgolf and Callaway segments, an operational rebound at venues, and moderating macroeconomic headwinds. Recent insider buying further supports confidence in the underlying value, suggesting substantial upside potential from current trading levels.
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Latticework 2025 will be held in New York City on October 7th. In fireside chats with audience participation, the summit will explore intelligent investing in a rapidly changing world. Keynote speakers include:
Chris Bloomstran, President of Semper Augustus Investments Group
Tom Gayner, CEO of Markel and Director of The Coca-Cola Company
Saurabh Madaan, Managing Member of Manveen Asset Management
Bob Robotti, President and CIO of Robotti & Company Advisors
Tom Russo, Managing Member of Gardner Russo & Quinn
Will Thomson, Managing Partner of Massif Capital
Christopher Tsai, President of Tsai Capital Corporation
Ed Wachenheim III, Chairman of Greenhaven Associates
Disclaimer
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Slides
Let’s watch the presentation and look over the transcript.
