The Cost of One Putt

“That was ugly” quipped by brother. “Good thing you’re not a pro, your family would starve” remarks another brother. My playing partner just sneers at me. Another typical round of golf with family and as usual, I missed that dreaded 2 footer. For me, it costs a mere ounce of pride and some dignity which will be regained with a round of drinks at the 19th hole. But as I sat down in the cart, I thought about my brother’s comment and what the professional golfer would lose. Just exactly how much does he pay for the same missed putt?

The answer depends on your rank on the PGA Tour. Naturally the higher you are ranked the more likely you are to earn greater dollars by taking first, second or third prize. Most commonly, the first place winner earns more than a one million dollars. Second place usually earns in the $600,000 range and third drops down to less than $400,000. In a single tournament, that one stroke could cost more than half a million dollars.

But I’m interested in the overall average for a season. This calculation is based on the 2012 season for information through October 2012.

The standard is set by Rory McIlroy. He had the lowest stroke average at 69.63 and the highest earnings. Tiger was second with a stroke average a mere .15 strokes higher per round of golf. He earned $180,311 less on average per tournament due to his stroke average being .60 (.15 x 4) higher over the four rounds of golf in comparison to Rory. For Tiger, each time he casually approaches that 1 to 2 footer and misses the putt, it costs him $300,000 ($180,311/.60).

Click to Enlarge

As the ranking decreases (heads toward 50th place) in stroke average, the average earnings of the golfer decreases as well. Thus, for Ben Crane, (50th in stroke average in 2012 to date) his stroke average is 1.11 higher than Rory per round, 4.44 strokes worse in a tournament. On average he earns $398,000 less than Rory per tournament or around $90,000 per stroke.

The graph to the right illustrates the value of a single stroke in golf, to a professional golfer, based on his rank, in accordance with his overall season stroke average. There were some anomalies. Phil Mickelson is ranked 26th overall and earned a whopping $4.2 Million for the year. He is ranked 8th in earnings, thus the little increase at the 25th ranking on the graph. For Phil, it costs around $86,700 per missed putt. This is due to the number of victories he earned during  the year. Timing does have a significant bearing on the final cost. But the graph illustrates the overall average. For those ranked around 150th in comparison to Rory, almost 2 strokes more per round of golf, each stroke costs around $56,000.

It does make sense, because for those of us who rank around 10 millionth in scoring average in comparison to Rory (i.e. I stink at this game), the cost is miniscule. A round of drinks and a few laughs aimed at my expense. You too can understand this difference; if you are a scratch golfer, it costs you a few dollars and some pride. For those golfers that we see on TV on the weekends that haphazardly slap the putter against the ball for a 1 footer and miss, well, they pay for it dearly with a much smaller check on Sunday night. Act on Knowledge.

Value Investing

Do you want to learn how to get returns like this?

Then learn about Value Investing. Value investing in the simplest of terms means to buy low and sell high. Value investing is defined as a systematic process of buying high quality stock at an undervalued market price quantified by intrinsic value and justified via financial analysis; then selling the stock in a timely manner upon market price recovery.

There are four key principles used with value investing. Each is required. They are:

  1. Risk Reduction – Buy only high quality stocks;
  2. Intrinsic Value – The underlying assets and operations are of good quality and performance;
  3. Financial Analysis – Use core financial information, business ratios and key performance indicators to create a high level of confidence that recovery is just a matter of time;
  4. Patience – Allow time to work for the investor.

If you are interested in learning more, go to the Membership Program page under Value Investing section in the header above. 

Join the value investing club and learn about value investing and how you can easily acquire similar results with your investment fund. Upon joining, you’ll receive the book Value Investing with Business Ratios, a reference guide used with all the decision models you build. Each member goes through three distinct phases:

  1. Education – Introduction to value investing along with terminology used are explained. Key principles of value investing are covered via a series of lessons and tutorials.
  2. Development – Members are taught how pools of investments are developed by first learning about financial metrics and how to read financial statements. The member then uses existing models to grasp the core understanding of developing buy/sell triggers for high quality stocks.
  3. Sophistication – Most members reach this phase of understanding after about six months. Many members create their own pools of investments and share with others their knowledge. Members are introduced to more sophisticated types of investments and how to use them to reduce risk and improve, via leverage, overall returns for their value investment pools.

Each week, you receive an e-mail with a full update on the pools. Follow along as the Investment Fund grows. Start investing with confidence from what you learn. Create your own fund and over time, accumulate wealth. Joining entitles you to the following:

  • Lessons about value investing and the principles involved;
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