ClubCorp (MYCC) reported second quarter results that show our investment thesis is on track. MYCC reaffirmed their full year guidance. Same store sales and EBITDA continue to grow steadily as MYCC invests in club reinventions. Recent acquisitions are driving more dramatic growth on the top and bottom line, and cost synergies have met expectations. MYCC management sounded very confident about the opportunity for future acquisitions, saying that the pipeline was as robust as they have seen in many years. We believe shares of MYCC can rise into the low-$30s.

MYCC’s results highlighted the strength of their business model, which is based on subscription dues and geographic diversification. Adverse weather conditions in Texas during the quarter caused flooding after heavy rains, leading to weakness at single courses that collect a daily fee for their golf business. However, although MYCC has their largest concentration of clubs is in Texas, weather-related weakness had an extremely limited impact.

After the quarterly results were announced, MYCC conducted a secondary offering of shares held by private equity firm KSL Capital. The announcement has temporarily depressed the stock price, but it also removed most of the remaining private equity stake held by KSL Capital. The risk of future secondary offerings is now greatly reduced, which removes a headwind to the stock price once investors move past this deal.

MYCC is benefitting from an apparent resurgence in the popularity of golf. This resurgence could be partly due to the recent success of younger players on the PGA tour, including Jordan Spieth, who started playing at MYCC-owned Brookhaven in Texas. The average age of new MYCC members continues to decline, providing a healthy outlook for the future of their membership base. This age decline is also partly due to MYCC’s focus on providing value for the entire family at their courses by adding amenities for children as well as adults.

MYCC is widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts.  Steve is sole proprietor of Northlake, a registered investment advisor.  Northlake’s regulatory filings can be found at www.sec.gov.  MYCC is a net long position in the Entermedia Funds.  Steve is portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies.