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| By Nilus Mattive |
I’m writing this from a hotel room in Waco, Texas.
It’s my third time visiting this city. But unlike most visitors, I’m not here because of Baylor College … Magnolia Market … or even the Dr. Pepper Museum.
I come here with my daughter to surf a wave pool on the outskirts of town.
And to eat BBQ.
What does this have to do with investing?
I’ll explain in a minute.
But first, let’s back up a bit …
When I say, “wave pool,” I’m talking about some type of machine creating regular waves across the surface of a manmade body of water.
Sure, we’ve had these for decades now.
Take the one at Dorney Park and Wildwater Kingdom in Allentown, Pennsylvania.
As a young kid, I loved riding a bodyboard across the pool’s relatively gentle breakers.
They even held a professional surfing contest in that pool back in 1985.
As People reported at the time:
“To inaugurate its surf-generating amusement-park attraction, the Pennsylvania town hosted the world’s first inland surfing championship. The pool at Dorney Park’s Wildwater Kingdom uses computer-driven hydraulic rams and paddles to create three-to five-foot waves.
[Owner Bob] Plarr dreams of the day when champion surfers come out of Allentown — certainly a radical notion. Muses Ian Cairns, president of the Association of Surfing Professionals: ‘We could have a world surfing champ who’s never been near the ocean.’”
However, the event was mostly a bust because the waves were weak and mushy, more like the whitewater you see tumbling onto shore at the ocean’s edge rather than the spinning cylindrical tubes most surfers are looking for.
Only in the last decade has technology really allowed wave pools to simulate the size, strength and shape of real ocean waves.
Indeed, Plarr’s dream is finally coming true.
And the wave pool here in Waco — which first opened to the public back in 2018 — was the one that really broke the scene wide open.
My daughter and I visited back then when things were still a little rough around the edges, and booking sessions was relatively difficult.
Today, the operation runs like a well-oiled machine … there are very nice accommodations right on site … and even extra features like a food truck serving solid meals.
Of course, as I said, I do most of my dining at various barbecue joints throughout the area.
Some of my favorites include the spicy chop sandwich with “sause” at Rudy’s … the rib plate at Jasper’s … and the slow-smoked chicken at Vitek’s.
Which brings me to the investing part of the equation.
While wave pools have been around for many decades, investors are finally lining up to get in on the trend now that the technology has finally evolved enough.
The wave pool in Waco is a perfect example.
It was originally developed almost as a pet project by a local guy. Then, two years ago, a group of investors from California stepped in and bought it.
Meanwhile, the person who used to run the day-to-day operations partnered with a different group of investors and opened a different wave pool in Palm Springs, CA. My daughter and I were in the very first public sessions there earlier this year.
There’s also a very famous wave pool in Lemoore, California. Renting it costs somewhere in the range of $50,000 to $75,000 a day.
Or, if you’re on the East Coast, there’s now an indoor wave pool in the American Dream Mall in East Rutherford, New Jersey.
I could keep going because additional pools are currently in various stages of planning, testing or operation in places like Virginia, South Carolina and Arizona, too.
And that’s just in the United States.
This is actually a global trend with wave pools already operating in Brazil, Australia, Japan and Dubai … and points in between.
Are you getting excited yet? Do you want in on the action?
Should I tell you how to start investing some of your own money in this burgeoning trend?
Well, despite all the excitement surrounding them, I suspect most of these pools are losing money.
At the very least, they’re not the type of investments I look for.
Operating costs are quite high. Many operate seasonally. There’s continual upkeep, insurance, various workers on site at all times, plus a million other things to consider.
Meanwhile, long-term demand is anything but assured. The technology is rapidly changing. And obviously, competition is increasing at an alarmingly rapid rate.
So, sure, surfing these wave pools is great fun. However, I would much rather put my investment money into something like a simple barbecue joint.
The addressable market is large. The operating costs are relatively lower. It’s an easy business to understand. Demand has been steady for many decades now and is likely to remain that way for decades more to come. And the technology — or lack thereof — is well established.
Just consider Jasper’s, which I mentioned earlier.
It’s a little hole in the wall on the corner of Clifton and Elm in Waco and the oldest continuously operated barbecue joint in Waco.
As Waco History explains it:
“Jasper’s has never changed locations and remains a place where residents today can expect to be served the same fare that brought their hungry predecessors to the counter at its opening in 1919.
Jasper’s began as a humble pushcart fruit stand operated by Italian immigrant Jasper DiMaria.
In its early days of operation, the cart’s customer base was largely comprised of passengers from the interurban railway. Waco was the last stop on the rail line to Dallas, and travelers would frequent DiMaria’s cart to purchase refreshments for the remaining long haul.
Recognizing the profitability of offering more substantial foodstuffs from his cart, DiMaria started selling barbecue. He would go to a nearby meatpacker and purchase a quarter of a cow or a bull.
Soon customers were lining up for dishes like chopped beef and gravy or neck bone.”
It remained a family-owned business all the way through 1990. And even today, it still runs out of the same building … using the same recipes … and even cooking the meat in the very same boiling pit.
I’ll put my investment dollars in that type of small-but-profitable tub of water over a big, fancy wave pool any day of the week.
My recommendation is to think this way when you look at the broad stock market right now, too.
Sure, there are lots of exciting trends to latch onto. Some are even profitable at the moment.
But do the valuations make sense?
What must happen for you to continue getting adequate returns on your capital?
And can you rely on these investments if the economic tide turns?
My point is simple …
Nobody needs to surf in a wave pool. But everyone has to eat … no matter what.
Best wishes,
Nilus Mattive
P.S. Don’t look now, but there’s a rising tide in Bitcoin right now. And if you check out this new presentation, you’ll discover which little-known coins should be able to surf right past it for even larger gains.
