What to Know Before Buying Pool Corp. Stock

It's always nice when a company name gives a straightforward sense of what that company does, and Pool Corp. (NASDAQ: POOL) fits the bill. The company is the world's largest wholesale distributor of swimming pool equipment, parts, and supplies.

But that's not all there is to know about the company. Here's what you should know before you consider buying in.

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Know where Pool's money comes from

About one-third of Pool's revenue comes from new pool installations, which have declined over the past few years after seeing a huge boom during the pandemic lockdowns. Because most residential pool installations occur when a home is built, the same high interest rates that have led to a housing slowdown have depressed growth on this side of Pool's business.

The remaining two-thirds comes from sales related to maintenance and repair of existing pools. That revenue tends to be recurring, because even a homeowner who doesn't use their pool needs to maintain it so it doesn't turn into an algae-infested swamp. This should also give investors confidence that even if new pool installations remain sluggish -- as they have been in the post-lockdown era -- the company will still be able to fund its dividend, which currently yields about 2.1%

Know you're paying less than Buffett

At its current price of about $233 a share, Pool's stock is trading at a price it hasn't seen since early 2020. It's even trading well below its five-year average price of $372 a share:

Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), run by billionaire investor Warren Buffett, has recently been buying Pool shares, but it paid much more for them. In fact, the lowest Berkshire could have possibly paid for any of its shares -- if it had timed the market perfectly during Q2 2025 -- was $285 a share. On the other hand, if Berkshire had had very bad timing, it could have paid as much as $390.03 a share for some of its Pool stock.

That means that investors who buy shares of Pool today are getting a discount of between 18.2% and 40.2% to what Buffett paid. That's a compelling offer.

Know it's a marathon, not a sprint

The reason Pool's stock price has sunk so far from Berkshire's buying price -- and so very far from its 2021 high of $578 a share -- is the outlook for the real estate market.

True, the majority of Pool's revenue comes from maintenance and repair of existing pools, which doesn't have anything to do with the real estate market. However, because the company is a distributor of parts and supplies and not a manufacturer, there's a limit to how much it can hike prices before customers simply go elsewhere. That means the only way to meaningfully grow maintenance and repair revenue is to grow the number of pools to service.

But pool installations usually only come when the housing market is strong, which isn't likely to be the case for a while. Investors who buy shares of Pool now should be ready to wait years for the housing market to recover, relying on Pool's dividend (currently yielding 2.1%) to tide them over in the meantime.

John Bromels has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.