We all know when a stock is hot. When that happens, it is usually too late to make big wins. In this episode, Jack Gibson explains how to invest early in the right companies (Hint: They are probably companies you already enjoy).
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Listen to the podcast here
Investing In Experience: The Next Best Thing To Top Golf
In this episode, I’m going to walk you through a company that I’m investing in. Whenever I buy into an equity position in a company, I simply ask myself this question, “Is this a company that I want to own and hold for the next decade?” In the two previous private businesses I started, I’ve owned one for 24 years, and the other for 6 years. When I started Indestructible Wealth, it was a ten-year commitment.
The major challenge that most investors make is that they spend hours and hours researching about cars and what others are saying. They test drive them, they buy, and become a proud owner for multiple years, but they buy a company without having any idea what the company does, why it does what it does, or where it could go in the future. I’m not at all suggesting that you buy into this company because I am.
I want to walk you through how I go about thinking about buying into a company, why I like it, and why I would like to be an owner. Would I be proud to be an owner of this company? We need to stop turning over our money to someone else who statistically has proven that they cannot beat the market. Let’s get going and watch me buy a piece of a company that I’m going to love. My goal is for you to become a sophisticated investor in about five years versus the 24 years that it took me.
My goal is to get you financially literate so that you’re not only going off the whims of the markets and doing what everybody else is doing. We want to move against the grain. We want to move against what everybody else is doing. What’s unique about Topgolf is that it makes golf fun for those that suck at it. It’s also a lot of fun for good golfers too, because they can finally play golf with their good friends and family that they traditionally can’t.
If I got a friend who sucks at golf, first of all, he’s probably not interested in coming with, or if he is, I simply can’t stand the thought of watching him hack away and slowing the game down. That’s why I can’t take both of my boys at the same time. Tyler, my youngest, is a hacker. He’s aggressive. He loves baseball, football and basketball. I wished he loved basketball the most, but it’s still number 3 or 4 on his list. He doesn’t like golf that much because he hacks away. He swings as hard as he possibly can. I don’t enjoy taking him because he’s not good. He slows us down. He throws tantrums.
My oldest son, John, is much more reserved and focused. He takes his time. Golf is for him. I enjoy taking John. Sometimes, he’s not focused and he is off his game. He’s being a teen and it sucks because he slows me down. Topgolf is something I can do with both of them. We can do it as a family. Topgolf has a wide array of different games for all skill levels and what’s cool is that every ball you hit has a tracking device in it so that when you hit the various targets out there in the range, it adds to your score.
They set some of these targets up super close. If you completely, totally suck at golf, never played before and you take a little half swing chop at it, you can hit these targets in front of you and score points. On top of that, what probably really sets Topgolf apart is it has a huge bar and food delivered right to your bay. Every bay has a waitress that’s going to bring you food and drinks.
Even if you don’t even want to swing the club, you can still have some fun going to Topgolf, making fun with your friends, and having a few cocktails. A couple of weeks ago, I took a trip down to Indianapolis for spring break. This is our, “You got to get out of the house-type moment,” and do something with the kids. We took a three-day trip and the biggest reason we wanted to go was for Topgolf. One of our kids had done it and one hadn’t. It was something cool we could do as a family.
We had to reserve our bay a week in advance, and that was for a Friday morning at 11:00. My boys had a blast. We ended up adding on an additional hour of time in the bay because we were having so much fun. When we drove by it the next day, we happen to go by the Topgolf location again, and this was a Saturday, there was a line out the front door.
What that told me is that the demand for Topgolf is strong. This is a business that cranks out cash and profits because they’re making money on the golf and renting the bays, but they’re making tons of cash profits on the alcohol. Because alcohol is one of the most profitable things that any venue can sell because they can mark it up to 300%, 400%, 500%, or probably more than that. I don’t even know what the margin is, but it’s high.
It cranks out cash and profits and I don’t see any signs of it slowing down. As the economy continues to open up from COVID, I can see more people coming out and looking for a fun activity to do like Topgolf. Things are starting to open up, but I can’t say as of right now, we have a fully open economy where people aren’t scared to go out. We’re not there yet. I see this pent-up demand that’s going to start unleashing itself and people are going to be anxious to get out and do these types of activities and have experienced.
Alcohol is one of the most profitable things any venue can sell because they can mark it up to 300%, 400%, 500%, or probably more. It cranks out cash and profits, and there are no signs of slowing down. Click To TweetTopgolf is an experience. It’s something that you can do whether you like golf or not. From what I can see, investing in Topgolf would be a company that I would be proud to be an owner of. I would love to own a piece of this company. However, there’s one big problem. I cannot. It’s still a private company. If I wanted to open a Topgolf franchise, that’s about $18 million I’ll need to raise. If I did that, it would be risking my current lifestyle for a better one and that’s something I would never do.
How do I get a piece of this action? I want to tell you about Drive Shack. It is a $300 million golfing company, which used to operate a bunch of traditional golf courses around the country. They’ve been selling these courses and using the proceeds to build multi-purpose entertainment facilities. Think Topgolf, maybe with a couple of minor variations in terms of the golf setup. They use radar tracking on the balls instead of chips in the balls. They have different targets. It’s very similar to Topgolf. Mostly, they’ve set them up so far in the Southeast, but it intends to open up dozens more across the country over the next few years.
At the same time, Drive Shack is pioneering an even newer alternative social entertainment concept called the Puttery. This is an adult mini0-golf with a bar, food, and social hangout spaces. Let’s say you don’t want to swing a golf club and you don’t want to go to Topgolf. Everybody loves Putt-Putt. Who doesn’t like Putt-Putt? If you don’t like Putt-Putt, just unsubscribe right now. I don’t give a fucking deal with you. You got to love Putt-Putt. I’m kidding. Don’t unsubscribe, you’re valuable but this is something that I think everybody would like to do, a mini-golf with a bar and food. Sign me up. Competition. Something I could do with friends and my family.
The first Puttery is going to open in Texas in the summer of 2021. Between Drive Shack and the Puttery expansions, this company is in a great position to grow at light speed over the next few years, even without the pent-up demand when the millions of people who can’t wait to get the fuck out of their houses and have some fun.
Here’s the good news. You can’t buy Topgolf, but you can buy into Drive Shack. Drive Shack is a publicly listed and traded company. Here’s what I also love about Drive Shack. It’s a $300 million company. When I say just, I don’t mean to diminish. That’s much bigger than any company I have to build by multiples. That means that it has a huge potential upside. Let’s think about Apple. A trillion-dollar company like Facebook and Google. They are huge, billion, multi-billion, almost trillion dollar valuations. How much more is their upside now? They can still grow for sure. They can still go up, but their time of parabolic high speak growth is probably in the past.
If you had invested in those big companies many years ago like Facebook, certainly, you’d be up quite a bit. If you would’ve bought and held, you would’ve gone through some massive ups and downs as most technology companies do. They have their big ups and they can have some equally big downs, but you would’ve done well.
What I like about small-cap companies and they are companies that are usually in under a billion. These have the parabolic opportunity. They can still crank sales to huge levels and that means share prices are going to go up big too. Analysts see sales rising to $400 million by 2022 and then $500 million by 2023. I think these are conservative numbers. I think Drive Shack, in my humble opinion, can grow bigger and faster than these numbers.
This is a bet I like because I love the experience that it will provide. I understand their model because I’ve been to Topgolf, so I get what they’re doing. I see the demand. I see the people and the waitlist to get in. I see the number of people that are waiting outside on a Saturday to get into Topgolf. Being a smaller company gives it room to grow at a fast pace than these larger established companies.
Investing In Experience: Smaller companies have room to grow at a fast pace than these larger established companies.
You don’t need to buy shares in this because I like it and I’d be proud to be an owner. I want you to start thinking about buying into companies that you know and understand and that make sense to you. Not only in terms of where currently stands in the market, but where you think it can go in the future. I’m still kicking myself because I’ve been using Zoom for over five years now. In my direct sales company, we were some of the early adopters of Zoom and I loved the product. I loved the Zoom platform. It was so much better to me than anything else videoconferencing that was out there, hands down. Everything for us is about Zoom.
Why didn’t I buy into Zoom a few years ago? I wasn’t thinking this way. I was one of the first early adopters of Tesla. I wouldn’t say the earliest adopter by any stretch, but earlier adopters. I love technology. I love the car. I’ve been driving one ever since. It makes driving fun. I love it. I look forward to driving somewhere just because of the experience that it gives me. Why didn’t I buy into Tesla many years ago? The company wasn’t profitable at that time. I was nervous about buying into a company that wasn’t profitable.
Based on how I love the product, other people talked about it and the reverence that the Tesla name had, why didn’t I buy in? Because I wasn’t thinking this way. In my opinion, it’s too late to buy Tesla. It’s mainstream and too many people have bought into it. The valuation of the company is off the charts. That stock would have to drop significantly for me to be interested in buying it but you want to start thinking about this guys.
Start thinking about products and places you go and experiences that you have. Think about, “Did I like this? Would my friends and family like this?” Is this catching on? Are people talking about it? Start thinking, “Is this a company that hasn’t yet hit the mainstream?” I want to get in things early. I want to get into things before they get adopted by the masses. That’s where you create the money. That’s where wealth is created. It’s being first to market, an early-stage market. That’s where you’re going to make your money in any business or investment opportunities.
Get into things before they get adopted by the masses. That's where you create the money. Click To TweetI want you to start thinking this way and simply looking around you for what you like. What are things that you’re like, “That’s a cool product? I like that product. I could see this catching on. I could see this becoming big.” Start looking them up and see if they’re publicly traded and then you’ll start learning about valuations and what price-to-earnings ratios make sense. That’s the stuff we’re going to start teaching you on this platform so you can take a company or a product or a service and a company that you like and then you can say, “Where do I think this is going in the future? What’s its current price-to-earnings ratio? Is it off the chart? Is it way too high? Does it not make sense? Has this got adopted by the masses?”
If everybody’s using it, talking about it and buying the stock, I’m not interested. I want the early-stage companies. I hope this helps. Let’s create some indestructible wealth. There is still plenty of upside in the stock market. I know it’s at an all-time high, but I believe with the amount of technology, disruption and the way things are going to be happening with technology companies, the opportunity for high-growth stocks is still very much alive. It’s going to be an exciting decade with technology. A lot of these companies and things that are coming out, the only way you’re going to be able to invest and access them is through buying them in the stock market.
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Important Links
- Topgolf
- Drive Shack
- iTunes – Indestructible Wealth with Jack Gibson
- [email protected]
