What Golf Teaches Us About Investing

Going for the Green

What’s Cooking for Williams-Sonoma?

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I probably play an average of, oh, say, one round of golf a year.  That includes the years when I go totally berserk and get in two or three rounds, as well as years like this one when I probably won’t play at all.

For all the abuse golf attracts based on some of its obnoxious practitioners and its sometimes questionable land-use practices, I think it’s a fabulous game, and there’s one big reason why.  

Because it can’t be mastered.  Even if you have every advantage there is.

If you take away from golf the opulent clubhouses, the manicured courses, the clubs crafted from dragon’s toenails and depleted uranium and the sometimes bizarre styles of clothes, bags, carts and shoes, what you have left is the same silly game that shepherds began playing in 12th century Scotland: trying to hit a rock into a rabbit hole with a stick.

No matter the splendor of the setting or the sophistication of the equipment, eventually you have to hit the ball.  That’s when the fun begins.

The possible courses the ball can take don’t clock the entire compass, but it’s certainly close to 120 degrees depending on your shank or hook.  It’s also possible for the ball to roll a humiliating five or 10 feet or even to just sit there undisturbed on the tee giving you the raspberry.  Even if you get the pellet in the air, it can still head for the rough, the bushes, the trees, the bunkers or the pond.

In golf, nothing can save you from the consequences of your actions.  Period.  Unless you’re one of those vermin who use the hand wedge or the foot iron to move the ball to where you wish you had hit it (or just lies with the scoring pencil), you’re doomed to make the best of it.  As the back cover of the official rules of golf states, “Play the ball as it lies, play the course as you find it, and if you cannot do either, do what is fair.”

The golf course never gets mad, but it can get even.  It doesn’t warn, but it will punish.  

The absolute even-handed justice of golf drives some players nuts.  They will blame their poor results on everything from bad luck to poor course conditions to inferior equipment to substandard caddying to satanic intervention.  Their best efforts go into newer and better excuses, not into improving their swings or their tactics.

The half dozen or so twisted clubs that I’ve seen abandoned on courses over the years probably weren’t the real culprits in some angry duffer’s poor round.  Everyone plays the same course and they all play with the equipment they brought with them, including their skills and their temperament.

I hate to even start on this next part because you’ve probably already realized where I’m going with it, but here goes.

Stock investing is just like golf in every way that matters.  

Markets are completely impartial and their rewards and punishments are meted out with an even hand.  They cannot be mastered.  You can make two investments that seem exactly the same to you and yet one will deliver a sack of cash and another will turn into a box of rocks.

Just as in golf, the most important question in investing is “What are you going to do next?”  After hitting a ball into a fairway bunker you have to decide whether to try to advance the ball toward the green or just get back on the fairway.  In both golf and investing, sometimes you go for the big shot and sometimes you play it safe.  But whining about conditions won’t help you a bit.

And just like golf, investing requires you to know your own temperament and limitations and the current conditions on the course and play accordingly if you’re going to make money.

Both golf and investing can be played safely and conservatively.  Or not.

And finally, you can become either a better golfer or a better investor by getting professional coaching and advice.

And since I’m Cabot’s Old Pro as far as China and the emerging markets go, you might want to check out my Cabot China & Emerging Markets Report for some powerful advice on how to go for the greens in the most exciting markets on earth.  The Report is the #1 newsletter for the last five years, according to Hulbert Financial Digest. Don’t miss out on the enormous opportunities I’m uncovering in the emerging markets right now! The link below will get you started.


I could maunder on about markets or stocks or companies at greater length.  But it’s almost the end of August and I expect that most of you are anxious to see what today’s stock is and then get to the swimming pool (or the beach or the mountains) or just into the back yard for some hammock time.

As an emerging markets specialist, I usually recommend a stock from outside U.S. borders.  But I also watch the wider market, and for this issue I’ve picked a U.S. stock with an intriguing story and an earnings-powered gap up under its belt. It’s a specialty retail company that’s had some good earnings news and has another good reason for attracting attention.

Williams-Sonoma (WSM) is a San Francisco-based retailer that operates more than 600 stores including 264 Williams-Sonoma high-end kitchen stores, more than 200 Pottery Barn and nearly 100 Pottery Barn Kids stores along with a few dozen outlets and other brands.

The company has been lowering costs by putting greater emphasis on online sales, allowing it to reduce its bricks-and-mortar footprint while still increasing profits.  Management says it will close 16 stores by the end of the year.

The company’s earnings report yesterday revealed a surprise profit of five cents per share despite a fall in revenues.  Sales were down 18% year-over-year.

Williams-Sonoma’s stores, especially its kitchen stores with their expensive pots and pans, aren’t really expected to do well when the economy is contracting.  When times are tough, people can heat a can of beans right in the can, if necessary.  But management is getting through this thin patch with aggressive cost cutting, which will keep the company in good financial shape until the economic winds pick up again.

I have one additional, possibly silly, reason for recommending Williams-Sonoma.  It has to do with the popularity of the movie “Julie & Julia,” in which a thirty-something New Yorker sets out to cook every recipe in Julia Child’s Mastering the Art of French Cooking in one calendar year and blog about the experience.  

The movie has been a hit and the book has risen to #1 in sales at both Amazon and Barnes & Noble and is #3 at independent booksellers.  It may not last long, but the surge in enthusiasm for classic French cooking (plus the sight of all those beautiful Le Creuset pots in the movie) seems to me like a perfect catalyst for an unexpectedly robust quarter for Williams-Sonoma stores and for the stock.

WSM has already made a huge move from its low of 4 late last year and it re-launched from 15 1/2 to 17 1/2 on huge volume after Wednesday’s earnings news.

A small bet on WSM, especially if you can pick some up on a pullback below 17 could pay off handsomely.


Paul Goodwin
For Cabot Wealth Advisory


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