Growth Stock Portfolio: 12 Stock Picks By Warren Buffett

6. Pool Corporation (NASDAQ:POOL)

5-year average revenue growth (YoY): 13.08%

After the spike in demand in 2020 and 2021, Pool Corporation (NASDAQ:POOL) is currently negotiating a transitional phase. One of the biggest distributors of pool equipment and supplies in the United States and Europe had a sharp increase in demand during the pandemic; in 2021, the number of new pools built reached a peak of 117,000. New pool construction has, however, been progressively declining since that peak, with estimates for 2024 showing a nearly 20% fall in new projects. Its business has suffered due to this change; rolling twelve-month EBITDA margins have decreased from a peak in 2022 to 12.8% now, and quarterly sales growth has been negative since Q1 2023.

Pool Corporation (NASDAQ:POOL)’s long-term fundamentals are still strong despite these difficulties. The company’s maintenance and renovation products, a recurrent and strong category driven by the expanding installed base of pools that require continuous care, account for 86% of its revenues. New construction supplies constitute a smaller and more volatile part of the industry, making up only 14% of total revenues. According to the firm’s management, the company will eventually be able to resume positive sales and margin development as the pandemic-induced demand surge’s aftereffects fade. The pool supply area is expected to expand steadily at a rate of 4% to 6% per year over the long run, with the company in a strong position to surpass the competition through smart acquisitions and market share increases.

Pool Corporation (NASDAQ:POOL) shares outperformed despite a challenging demand environment for new pool construction. Particularly in the retail area, the company is doing well and gaining market share. In general, the company doesn’t let market conditions stop it from investing in technology, capacity, and capabilities. This strategy helped them emerge from the previous housing crisis in a very good position.

Despite short-term difficulties, Pool Corporation (NASDAQ:POOL) is well-positioned for long-term growth due to its strong market position, recurring revenue model, and industry tailwinds.