Could Buying Pool Corp Today Set You Up for Life?

Investors often look to the decisions of Warren Buffett and his team at Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), thinking Berkshire's investment decisions can set them up for a lifetime of profits. But even the Oracle of Omaha makes investment mistakes. So what about Berkshire Hathaway's position in Pool Corp (NASDAQ: POOL)? Is this a long-term winner? Perhaps, but there's a caveat.

What does Pool Corp do?

Pool Corp is basically a specialized retailer. It sells supplies to build, update, and maintain pools. These are recreational assets, and they have some rather interesting dynamics. The first piece to keep in mind is that once a pool is built, it has to be maintained unless you want a green swamp in your backyard. That means constant spending on maintenance. Second, each new pool that gets built adds to the ongoing demand for maintenance supplies.

Image source: The Motley Fool.

While pools do get removed, for the most part, demand for supplies continues to grow over time as new pools get built. So there is an inherent growth bias to the industry that Pool Corp serves. The demand for supplies creates a solid foundation for the retailer's business, with the ups and downs in construction leading to variability on the top and bottom lines. The construction and upgrade side of things is pretty simple to understand. When times are good, more pools get built and upgraded. When times are bad, particularly during recessions, fewer pools are built and upgraded.

There are obviously more nuances to the business, including the cost of the supplies the company sells. But the big picture is an inherent bias for growth in demand for supplies (which make up nearly two-thirds of Pool Corp's revenues). This could be why Berkshire Hathaway owns the stock, though there's really no way to truly know since the conglomerate can be tight-lipped from time to time about its investments.

POOL data by YCharts.

Could Pool Corp set you up for life?

The interesting thing here is that Pool Corp's stock has lost half of its value since hitting an all-time high in 2021. What happened was classic Wall Street over exuberance. In 2020, during the COVID-19 pandemic, people stuck at home started to build pools at a rapid clip. Low interest rates at the time helped to spur demand. When the world opened back up again, demand for new pools slowed down. When demand for pools was hot, so too was the stock of industry supplier Pool Corp. When demand for pools cooled off, so too did the price of Pool Corp's stock.

But it seems likely that investors got too excited on the way up and now have maybe gotten too negative on the way down. For example, the stock's 1.7% dividend yield is near its highest levels of the past decade. That hints at a cheap valuation, noting that the dividend has been increased annually for 15 consecutive years.

Some more traditional valuation metrics suggest an attractive price point, too. The price-to-sales and price-to-book value ratios are both below their five-year averages. That said, there's a slight caveat. The price-to-earnings (P/E) ratio is a touch above its five-year average and sits at roughly 28x, which is hardly a low P/E ratio on an absolute basis. But as noted, Pool Corp is an inherently growth-oriented business.

And that speaks to the issue of whether or not Pool Corp could be a good choice for your portfolio. Given the yield, dividend investors probably won't want to own the stock. Given the P/E ratio, value investors probably won't want to own the stock either. It is most appropriate for growth investors and growth and income investors. If you do buy it, you need to understand that the business is highly sensitive to economic growth. That means you'll need a strong stomach to own it through the inevitable hard times if you want to benefit from its long-term growth potential.

POOL data by YCharts.

You'll need to buy with Buffett-like determination

As the chart above highlights, the last time Pool Corp's stock fell as much as it has recently was during the Great Recession. So this could be a huge opportunity to buy into Pool Corp. The problem is going to be sticking with the investment to benefit from the company's long-term growth.

On that front, Warren Buffett can again be a guiding light. He tends to buy good companies when they are attractively priced, and then he holds them for the long term. If you have the fortitude to stick out the tough times and a growth bent to your investment approach, Pool Corp looks like it could help set you up for life. But that's only true if you stick around, like Buffett, for the long term.

Should you invest $1,000 in Pool right now?

Before you buy stock in Pool, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Pool wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $704,676!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $950,198!*

Now, it’s worth noting Stock Advisor’s total average return is 1,048% — a market-crushing outperformance compared to 175% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 23, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.