Pool Corporation (POOL): A Bull Case Theory

We came across a bullish thesis on Pool Corporation (POOL) on Substack by Douglas Ott. In this article, we will summarize the bulls’ thesis on POOL. Pool Corporation (POOL)'s share was trading at $291.33 as of April 28^th. POOL’s trailing and forward P/E were 27.28 and 25.19 respectively according to Yahoo Finance.

Pool Corp, once riding high on unprecedented pandemic-era demand, continues to grapple with a prolonged correction in its business fundamentals. For the first quarter of 2025, the company posted another year-over-year revenue decline of 4.4%, marking the ninth consecutive quarter of negative growth. This persistent slowdown is a stark contrast to the outsized gains Pool Corp experienced during the 2020–2022 COVID period, when demand for residential pools and related products surged as consumers redirected discretionary spending toward home improvement. That brief window of explosive growth—over 50% revenue increases in a single year without acquisitions—was highly anomalous in an industry that typically sees modest 4–6% annual growth. The inevitable hangover from this pull-forward effect continues to weigh on Pool’s topline, and recent results suggest that normalization is proving slower and more complex than initially expected.

Beyond the unwinding of COVID-era excess, new challenges have emerged. Management now attributes sluggish performance to a mix of regional headwinds, macroeconomic pressures, and policy-related volatility. Texas, historically one of Pool Corp’s strongest markets, saw revenues decline 11% in the quarter, a particularly sharp drop compared to the flat performance in other top states like Florida, California, and Arizona. Management cited weather, economic uncertainty, and high interest rates as contributing factors but offered no clear catalyst for improvement. In contrast, Florida remains a relatively bright spot for the company, with CEO Peter Arvan reaffirming his confidence in the long-term strength of the market, though acknowledging the complexity of consumer decisions in the face of rising costs and economic uncertainty.

The broader trend weighing on the company is the rising cost of new pool construction, driven not only by higher interest rates but also by tariffs and increased labor expenses. Tariffs in particular have begun to add incremental pressure to already high project costs, injecting more volatility into a market that serves an aging, wealth-sensitive demographic. With many potential pool buyers being older homeowners reliant on retirement savings and equity portfolios, any perceived instability—whether in investment markets or government policy—has a disproportionately large impact on decision-making for major expenditures like new pools or remodels.

Despite these pressures, Pool Corp’s core value proposition remains intact. Approximately 84% of the company’s revenues come from non-discretionary maintenance and repair products—items that homeowners must purchase to maintain safe, usable pools. These products, ranging from pumps to filters to heaters, are essential and resilient to macroeconomic shocks. CEO Arvan has repeatedly emphasized that even as material costs rise, the price sensitivity in this segment is low. This is because materials typically account for just 25% of the total cost of building or remodeling a pool, with labor being the dominant cost driver. A 3–4% increase in equipment costs has negligible impact on a $100,000 pool project, and more importantly, consumers simply can’t delay maintenance purchases—if a pump fails, it must be replaced immediately to prevent further problems.

Pool Corp has also demonstrated pricing power in passing along supplier cost increases. Following March tariff announcements, major vendors like Pentair instituted in-season price hikes of 3–4% in April, and Pool Corp quickly followed suit with matching price adjustments. This ability to preserve margin through pass-through pricing underscores the company's strong competitive positioning as a dominant distributor. Moreover, with more tariff-driven increases already announced, Pool will continue to adjust pricing accordingly, reflecting its embedded role in the supply chain.

Looking forward, Pool Corp’s return to growth may take time, but its foundational strength in non-discretionary pool maintenance and its unmatched distribution scale remain key assets. While the current macro environment—elevated interest rates, cost inflation, policy volatility, and skittish consumer sentiment—makes a rapid rebound unlikely, Pool Corp is well positioned for long-term resilience. Once the market stabilizes and the COVID hangover fully subsides, the company could return to its historical 4–7% annual growth trajectory. Until then, it will rely on operational discipline, pricing agility, and a sticky customer base to navigate the ongoing turbulence.

Pool Corporation (POOL) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 32 hedge fund portfolios held POOL at the end of the fourth quarter which was 32 in the previous quarter. While we acknowledge the risk and potential of POOL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than POOL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.