We recently published a list of Growth Stock Portfolio: 12 Stock Picks By Warren Buffett. In this article, we are going to take a look at where Pool Corporation (NASDAQ:POOL) stands against other growth stock picks by Warren Buffett.
Warren Buffett’s Berkshire Hathaway portfolio has long been a beacon for value investors looking for high-quality businesses with long-term competitive advantages. Since taking over as CEO of Berkshire six decades ago, the appropriately named “Oracle of Omaha” has outperformed the broader market.
As we approach 2025, some of Berkshire’s assets stand out as promising opportunities, combining excellent fundamentals with acceptable values despite the market’s sustained emphasis on technology and growth stocks.
Berkshire’s CEO is a strong believer in portfolio concentration. Buffett’s investment strategy revolves around choosing companies with significant competitive advantages, effective management teams, and the potential to create regular free cash flow. His concept focuses on buying exceptional firms at acceptable costs rather than inferior enterprises at low rates. This strategy has proven successful across numerous market cycles, with Berkshire Hathaway providing compound yearly returns significantly higher than market averages over several decades.
The “Oracle of Omaha” concentrates on companies he understands, avoiding complex technologies or models with uncertain earnings potential. He looks for companies with pricing power, great brand awareness, and the ability to preserve or grow market share even during economic downturns. Buffett’s conservative yet effective approach has helped him become one of history’s most successful investors.
Following the filing of Berkshire’s 13F on February 14, we now know that 60% ($180 billion) of Buffett’s $299 billion portfolio is concentrated in just four magnificent stocks.
Japanese stock investors are attentively watching Buffett’s letter in the hopes of gaining information that may affect the country’s trading houses. Buffett has previously approved Japanese trading companies, resulting in increased stock value. Market participants will examine his comments for clues about the future of these companies, particularly as they are impacted by decreasing energy prices and pressure from the US government to reduce oil expenses.
As usual, Buffett’s shareholder letter is expected to provide significant insights not only into Berkshire Hathaway’s performance but also into market trends.
Aerial view of a swimming pool with outdoor furniture surrounding it.
Methodology
For this article, we scanned Warren Buffett’s Q4 2024 portfolio. We then chose 12 stocks with the highest 5-year average revenue growth (YoY) and ranked accordingly.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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.
Overall, POOL ranks 6th on our list of Growth Stock Portfolio: 12 Stock Picks By Warren Buffett. While we acknowledge the potential for POOL to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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 is originally published at Insider Monkey.