I can hear all the golf enthusiasts on Wall Street laughing right now after reading the subject line of this blog post. There’s two reasons for this side splitting laughter: the first, Adams (ADGO) has been in business for 20 years and never shown much ambition to compete in the big leagues with Titleist, Callaway, Taylor Made, and Nike, to name a few. The second, the current state of the golf industry, doesn’t inspire much confidence. Even Nike (with that somewhat famous endorser) has been unable to grow their golf business in any significant way over the last six or seven years. The light at the end of the tunnel is near but proof of that is still debatable.

I consider Adams to be a fun money investment. I wouldn’t bet the farm but a few shares in the Plano, Texas, company wouldn’t be a tremendous risk. The stock currently trades around $1.95 a share and volume is very thin, less than 50,000 shares trade hands each day. The market cap is $45 million, putting it squarely in the micro cap arena and its competitors are significantly larger, better funded operations. However, they do have some attributes that work in their favor including the following:

• Tom Watson has been endorsing their clubs for years. Sure, he’s a long way past his prime but he wouldn’t use them if they didn’t work. Other golfers from the PGA, LPGA, Nationwide and Seniors Tours also endorse the products.

• Sales in 2006 were higher than they’ve been in five years at $76 million, with domestic sales up 30 percent (83 percent of total sales) and international sales up 65 percent.

• Operating profits in 2006 were up 68 percent from $2 million to $3.44 million with margins improving to 4.5 percent from 3.6 percent a year earlier.

• There is no company debt.

• In 2006, the company bought back 279,120 of its shares, representing more than 1 percent of the outstanding stock.

• The company’s Idea hybrid irons are the number one selling brand in specialty retail sales.

• At the end of 2006, the company bought the assets of Women’s Golf Unlimited including the Lady Fairway brand. This moves the company further into the growing women’s market.

• Return on equity, 24 percent, is higher than it’s ever been.

• Price to book and price to sales ratios are both at our below 1.

• Institutional ownership is less than 10 percent.

I read a stat the other day that blew my mind. According to the magazine I was reading, golf course closures in 2006 were greater than golf course openings for the first time in 60 years. In investing, when the experts are bullish, it’s time to get bearish and vice versa. Well, the same principal applies in golf. With such grim news, the turnaround is just around the corner and Adams is in perfect position to benefit from this revival.