We recently published a list of 15 Best Beaten Down Stocks to Invest In. In this article, we are going to take a look at where Topgolf Callaway Brands Corp. (NYSE:MODG) stands against other best beaten down stocks to invest in.
As per Charles Schwab, 2025 might bring hurdles for stocks in the form of uncertain trade policy, tougher fiscal policy, and subdued average growth in the global economy and corporate earnings. Collectively, these factors might result in significant volatility. On the positive side, improving growth and higher stock valuations might support strong returns overall for international stocks in 2025.
Challenges Faced by US Equities in 2024
As per Henry Allen, macro strategist at Deutsche Bank, the biggest sell-off of 2024 was seen at the beginning of August 2024. Between 1st August 2024 and 5th August, the S&P 500 index saw a decline of more than 4%. This was due to weak nonfarm payrolls report amidst worries that the US Fed might decide to keep monetary policy too tight. Furthermore, investors’ sentiments were further impacted by the poor earnings reports from the renowned tech companies. However, the strategist believes that, for equity investors, the U.S. economic data soon demonstrated some improvement and the markets rebounded.
Next, mounting geopolitical tensions have somehow weighed over the broader equity indices in 2024. Henry Allen highlighted that a market sell-off in April was primarily because of escalating tensions in the Middle East, with Brent crude oil seeing an intraday peak for the year of ~$92 a barrel. Between 1st April and 19th April, the S&P 500 index saw a significant decline of more than ~5%. However, Wall Street experts believe that tides are now expected to turn, and 2025 might be a promising year for global equities.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Structural Trends to Support Growth, Says Firetrail Investments
Firetrail Investments believes that several key structural trends are expected to aid global equity markets in 2025. Technological advancement might act as one of the most significant drivers, with businesses continuing to integrate automation, Al, and cybersecurity into their activities. Companies having innovative solutions in digital transformation will potentially benefit from significant digital adoption across sectors, spanning from finance to healthcare to manufacturing.
As per Firetrail Investments, the outlook for defensive and growth-oriented stocks in 2025 remains positive. This is because investors continue to balance the appeal of continuous income-generating businesses with the potential of high-growth entities. Companies operating in sectors such as technology, communications, and advanced manufacturing are expected to benefit due to favorable valuations and the normalization of interest rates. With capital becoming more accessible, such sectors will be well-placed to invest in further innovation, driving earnings growth.
As per the investment firm, in 2025, lower inflation, favorable labour market, and supportive monetary policy conditions are expected to provide a strong foundation for growth.
Our Methodology
To list the 15 Best Beaten Down Stocks to Invest In, we used a screener and sifted through several online rankings. After getting the list of initial 30-35 stocks, we filtered out the ones that have seen a significant decline on a YTD basis and are trading close to their respective 52-week lows. We also mentioned the hedge fund holdings around each stock. Finally, the stocks were ranked in ascending order of their hedge fund sentiment, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A group of happy golfers basking in the warm sun on a golf course.
Topgolf Callaway Brands Corp. (NYSE:MODG)
% Decline on a YTD Basis: ~42.5%
Number of Hedge Fund Holders: 22
Topgolf Callaway Brands Corp. (NYSE:MODG) is engaged in designing, manufacturing, and selling golf equipment, golf and lifestyle apparel, and other accessories in the United States, Europe, Asia, and Internationally.
Topgolf Callaway Brands Corp. (NYSE:MODG) saw potential headwinds in the recent past including a decline in same-venue sales of 11% in Q3 2024, with a more significant drop in 3+ Bay events. Apart from this, broader macroeconomic headwinds, such as cautious consumer spending, impacted the revenue growth in both Topgolf venues and its golf equipment segments.
However, Wall Street believes that Topgolf Callaway Brands Corp. (NYSE:MODG)’s stock is well-placed for a revival, with new initiatives and venue expansions anticipated to drive future growth. Furthermore, the company’s intention to pursue the separation of its business into two independent companies i.e., Callaway and Topgolf, should benefit it over the long term. Topgolf Callaway Brands Corp. (NYSE:MODG) believes that creating 2 companies will result in material benefits to the stand-alone businesses.
As per Topgolf Callaway Brands Corp. (NYSE:MODG), the transaction should result in enhanced strategic focus, optimized capital allocation, and simplified operating structure. The company expects to execute the spin-off in H2 2025. TimesSquare Capital Management, an equity investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“Our preferences in the Consumer-oriented sectors lean toward value-oriented or specialty retailers, franchise models, premium brands, or support services for other consumer companies. Also detracting from results was Topgolf Callaway Brands Corp. (NYSE:MODG), which manufactures golf equipment and accessories, as well as operates entertainment venues. Although recent channel checks indicated that TopGolf activity trends were improving, that softened later in the quarter. Overall revenues and earnings were less than anticipated, which led management to lower its guidance for the rest of the year. The company’s Callaway equipment and apparel business was more stable, though management also discussed a strategic review of the entertainment business. Subsequently, the company announced plans to spin off TopGolf in 2025. While we agreed with the rationale, the timing was at a point of weakness, and we exited the position that was down -31% during the quarter.”
Overall, MODG ranks 4th on our list of best beaten down stocks to invest in. While we acknowledge the potential of MODG as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than MODG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.