Topgolf Callaway: Two-in-One Value Play With Insider Buying and Catalyst

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.

Access Arvind and Jonathon’s original presentation on Topgolf Callaway (2024).

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About the instructors:

Arvind Mallik is a Managing Partner of KMF Investments, a pure Pay-for-Performance Private Investment Partnership based in Denton, Texas. KMF seeks long-term capital appreciation by investing in companies whose intrinsic value is significantly higher than the market price. Since its founding in 2008, KMF has found opportunities in world dominating franchises, hard assets below replacement costs, businesses at large discounts to liquidation value, and firms with beneficial exposure to rising interest rates. Prior to founding KMF Investments, Mr. Mallik was a Senior Manager in the Strategy practice of Accenture. At Accenture, he helped global companies formulate and execute strategies to enter new markets, develop innovative new services and solutions, and reduce their operating costs to improve shareholder returns. Mr. Mallik obtained a BS in Chemical Engineering and BS in Bioengineering from UC Berkeley, and an MS in Chemical Engineering from MIT. He graduated with highest honors from both institutions.

Jonathon Fite is a Managing Partner of KMF Investments, a pure Pay-for-Performance Private Investment Partnership based in Denton, Texas.KMF seeks long-term capital appreciation by investing in companies whose intrinsic value is significantly higher than the market price. Since its founding in 2008, KMF has found opportunities in world dominating franchises, hard assets below replacement costs, businesses at large discounts to liquidation value, and firms with beneficial exposure to rising interest rates.Prior to founding KMF Investments, Mr. Fite was a Senior Manager in the Strategy practice of Accenture, where he helped companies improve shareholders returns. He is also a Lecturer for the College of Business at the University of North Texas. Mr. Fite graduated with honors from the University of Arkansas with a BS and MS in Industrial Engineering.

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