We all want to get the best possible gains when we make an investment. So we try our best to spot the most successful businesses, the most go-getting entrepreneurs and newest, most ground-breaking products.
But here is another approach to the problem of making money. Why not just forget all about the difficult task of analysing businesses and ask ourselves this: when successful business people have made their fortune, how do they spend it?
Usually, the answer is a nice home, a fast car, some vintage wine, luxurious holidays and fancy works of art. Since this is where so much money seems to be spent, perhaps this is where we should be looking for our next punt.
The luxury goods sector is huge and thriving. Companies such as Mulberry Group (LSE: MUL), Burberry (LSE: BRBY), and Theo Fennell (LSE: TFL) know that, while their nationality may shift from one decade to the next, there are always plenty of mega-rich people wanting to enjoy their fortunes.
But forget about Russian oligarchs and Hollywood stars and reflect instead upon 20-year-old Jin Jeong.
The latest trend in the luxury lifestyle sector
Last week, this young Korean finished as the leading amateur golfer in the Open Championship, personifying another trend in the world of luxury. In Asia, golf is booming, and the golf course is the place where the rich and the powerful can parade their wealth and their status.
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Golf is not, I think, an elitist sport in this country. A round of golf costs no more than a meal in a restaurant. And although stuffy remnants of the attitudes of the 1950s have not quite died out at the older golf clubs, it is a sport that is available to just about anybody. But in Asia things are a little different.
Many years ago I was on a flight to Hong Kong. Due to a typhoon, the flight was diverted to Taipei. We were obliged to stay overnight before being taken back to the airport the following morning.
We were booked on the first light, at about 5.30 am, and the bus passed a golf course. To my amazement, even at that time of the morning, the course was packed with golfers, desperate for their fix of this maddening and challenging game.
I also used to travel to Tokyo and here I often saw massive, multi-tiered floodlit driving ranges. These were busy late into the night with golfing aspirants. The sad thing, though, was that few of those working so hard on the range ever got to play the real thing. In Asia, golf is exclusive and expensive. It is a luxury.
Gradually things are changing. If people want to play golf, then others want to build golf courses and make money out of the phenomenon. And that is precisely what is happening.
In the 1970s there were fewer that 50 courses in the whole of Asia. These were largely for the benefit of ex-pats. Now there are over 6,000.
So golf, like champagne, is gradually becoming accessible to the masses. And yet, also like champagne, it still carries the tag of luxury. It is still a sport associated with the rich and famous. It is what the marketers would call ‘aspirational’…
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A penny share looking to cash in on Asia’s golf obsession
So there is plenty of money in the golf business. One company that has recognised the possibilities and invested heavily in Asian sport is the French media giant Lagardere. But a penny share company that has its eyes on Asian golf is AIM-quoted Parallel Media Group (LSE: PAA).
A fortnight ago I attended an event called Korean Eye – an exhibition of Korean art at the Saatchi Gallery created by Parallel. Here I caught up with Parallel’s chairman David Ciclitura and group managing director Stewart Mison and listened as they enthused about the business potential offered by professional golf tournaments.
Already Parallel runs the Ballantines Championship in South Korea and the UBS Championship in Hong Kong, both of which are sanctioned by the European PGA Tour. It also runs the Korean Ladies Masters and is the promoter of the Kazakhstan Open.
I was curious to know how Parallel made money out of these events. I assumed that the major source of income is TV rights, but most of the revenue from TV goes to European PGA.
What Parallel does is to negotiate a deal with a host golf club, put up a prize fund, probably pay a few stars an appearance fee, find sponsors and then set about selling tickets, concessions and attracting corporate hosts.
Done well, and with a little bit of luck with the weather and the quality of the field, this can be a real money spinner.
So, after a period spent putting the group on a sound financial footing, I understand that Parallel is looking to increase its involvement in Asian golf. We should see some action here before to long. So watch out, or, as they say in golf: “Fore!”
• This article was first published in Tom Bulford’s twice-weekly small-cap investment email
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