Last weekend marked the death of Australian international rugby league footballer, coach and later commentator Bob “Bozo” Fulton. Three premierships as a player; two as coach of Manly; Australian coach in 39 tests. The accolades are too long to list.

But what Bozo is equally remembered for is the way he revolutionised player fitness. Once upon a time you trained on Tuesday and Thursday night and probably had a cigarette in the sheds at half-time on Sunday. Then along came Bozo. Out with the ashtrays; in with the hill sprints. These days of course, fitness is an obsession. And fitness tracking across all sports—professional and amateur—has taken on a life of its own. Leading the charge in pro sports is an Australian company called Catapult Group International (ASX: CAT).

Based in Melbourne with offices in Boston, Catapult develops and sells wearable sensors to monitor athletes' output. You’ve probably noticed the little lump in the back of players’ jerseys: that’s the sensor. The sensors provide real-time data and analytics to monitor and measure fitness levels, responses to specific training techniques, injury risk and help with rehab.

On Tuesday this week we spoke to Callum Burns, managing director and portfolio manager of ICE Investors Fund, which specialises in small-cap stocks such as Catapult (market cap about $450 million). There is a perception that fitness tracking is a crowded market. Perhaps that’s because of the ubiquity of smartwatches among ordinary punters. Burns admits he shared this perception before he examined Catapult properly.

“This company is now a global leader,” says Burns. “It's got over a thousand elite sporting teams that it services. And it's dominant in all sorts of sports: basketball, gridiron, etc. And this seems hard to believe, but every team in the NFL is a customer and has at least one product from Catapult. But the key point is, it's in the elite sporting arena, not for everyday use. We estimate it's about five times the size of its nearest competitors. So, yes, wearables are everywhere but at that elite level Catapult is a hands-down global leader."

There are risks, of course. The company suffered during the pandemic as it faced a sports industry dealing with worldwide postponements and cancellations of major competitions. The NCAA (US college sports), a major source of Catapult revenue, was particularly hurt as many games were either cancelled or played without fans.

But there have been some key wins since. In the first half of the year, the company completed its 100 per cent penetration of teams in the NFL by signing the Atlanta Falcons. It also signed a contract with the US Army Special Forces to help with soldier training. And it delivered 69 per cent growth in free cash flow—a second consecutive year in of positive free cash flow.

On Wednesday, the share price rose 13 per cent after the market absorbed the company’s positive FY21 results. 

Catapult Group International (CAT) v Morningstar Australia GR AUD Index - YTD

A chart showing the YTD share price of Catapult (CAT) vs the Morningstar Australia GR AUD index

Source: Morningstar Premium; data as of 28 May 2021

In Firstlinks this week, Graham Hand makes the case for letting that great company you picked just sit in the bottom drawer to do its work. Hand also examines the idea of “dogfooding” whereby a company takes pride in actually using the product is promoting. Its sounds self-evident but when you apply it to investing it throws up some fascinating conundrums.

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