Why Warren Buffett and Berkshire May Be Diving Into Pool Corp (POOL)

Why Warren Buffett and Berkshire May Be Diving Into Pool Corp (POOL)

In Q3 2024, Berkshire Hathaway initiated a position in Pool Corporation (POOL), and in its most recent 13F filing, Buffett’s firm disclosed a 140%+ increase in that stake. While it’s still a relatively small position in Berkshire’s portfolio (about $460 million as of now), the investment gives POOL a meaningful endorsement from one of the world’s most successful long-term investors.

A Business Buffett Can Understand

POOL fits one of Buffett’s most time-tested filters: a simple, durable business model with strong competitive advantages. As the largest distributor of swimming pool and outdoor living products in the U.S., POOL benefits from:

  • Market leadership in a niche sector with high recurring demand
  • Wide economic moat from scale, distribution network, and brand loyalty
  • Predictable product usage, as customers replace chemicals and maintain pools annually

Its moat isn’t based on cutting-edge tech or pricing wars — it’s about owning the channels, relationships, and repeat business that Buffett has long loved.

Quantitative Strengths That Align with Buffett’s Style

Interestingly, POOL also earns a high score — 89% (out of 100%) — according to Validea’s Buffett-based “Patient Investor” model. This model, inspired by the principles laid out in Buffettology, looks for companies with durable competitive advantages, consistent earnings, strong returns on equity and capital, prudent debt levels, and smart reinvestment of retained earnings. The fact that both Buffett’s team and a systematic interpretation of his strategy arrive at the same conclusion adds a layer of validation to the investment case. It’s a strong signal that POOL fits the mold of a classic Buffett-style compounder.

POOL passes nearly all of the key metrics in the Buffett model, including:

  • Consistent earnings power: Despite recent softness, POOL has grown EPS from $2.90 to $11.30 over the past decade.
  • High returns on capital: A 10-year average ROE of 61.4% and average ROTC of 25.7%.
  • Conservative debt profile: While POOL could ideally pay off its debt faster, it still passes Buffett’s threshold of less than five years.
  • Free cash flow and reinvestment discipline: POOL generates healthy FCF and earns a 12.7% return on retained earnings.
  • Share buybacks: Shares outstanding have declined in recent years, signaling management is shareholder-friendly and buying back stock.

Even the Buffett model return projections show promise — estimating a compounded annual return of around 17% over the long-term going forward. These estimates are inline with historical performance. Consider these total return figures below. POOL has rewarded long-term investors.

PeriodPOOLS&P 500 Index
10-Year17.62%12.35%
15-Year19.36%13.69%

Final Thoughts

While POOL might not appear as an obvious Buffett-style pick at first glance, a deeper look reveals a quiet compounder with moat-like qualities and a shareholder-friendly track record. It’s a business that dominates a niche, generates robust cash flows, and has delivered exceptional long-term returns. In many ways, it fits the mold of “boring” businesses that Buffett so often turns into big winners.

And with Berkshire’s increasing stake, POOL has earned more than a passing glance — it deserves a deeper dive.

🔎 Further Research on Validea

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