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Drive Shack: Take a Swing at This Golf Play

Drive Shack is one of the largest golf course companies in the world, with 78 properties across 13 states.

The new recommendation also is a special situation investment: Drive Shack (DS). Based in New York City, Drive Shack is a leading owner and operator of golf-related leisure and entertainment businesses, notes Mark Skousen, growth and dividend expert and editor of High-Income Alert.

It is one of the largest golf course companies in the world, as it owns, leases, or manages 78 properties across 13 states. (Forty-nine of these properties are public courses. The rest are private clubs.)

Drive Shack is also developing a nationwide network of innovative golf entertainment venues. These venues each will have multiple stories of hitting suites, where friends and even strangers can compete in a futuristic golf simulation.

The first venue will open in Orlando in the first quarter of 2018. Four other venues are in various stages of completion, and management is seeking a global pipeline of other locations.

The golf industry has experienced some lean times lately, as younger players have been less eager to take up the game and even time-pressed middle-aged golfers have been playing less.

Yet, the pessimism about the future of golf is way overdone. According to Forbes, golf still generates $70 billion in economic activity a year and impacts more than two million jobs. Plus, the fact that new courses are no longer popping up like mushrooms means there is less competition for existing courses.

Drive Shack’s acquisition and development plans give investors reason to expect sales and earnings to ratchet higher in the months ahead. Analysts are anticipating that Drive Shack will earn 32 cents a share in 2017. That makes the stock cheap at less than 13 times this year’s earnings, especially since profits came in 18% ahead of expectations in the September quarter.

A couple of guys who clearly share my optimistic outlook are Drive Shack directors Alan Tyson and Wesley Edens. Tyson bought 41,000 shares this month. Edens bought 399,000, an investment of more than $1.58 million.

Why is this a special situation pick? Because Drive Shack, with a market cap of less than $300 million, is smaller than most of the companies I recommend. However, the upside potential here makes this a worthwhile speculation.

So, pick up some shares of Drive Shack, but don’t pay more than $4.25. (Use a good-till-canceled limit, if necessary.) It may take you a day or two to get a fill, but that’s okay. Stay patient. Set the stop price at $3.25.

Mark Skousen, editor of High-Income Alert, is a growth and dividend expert.

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