Meet the World's Biggest Pool Supplier

Our pick is Pool Corporation (NASDAQ: POOL), the world's largest wholesale distributor of swimming pool supplies and backyard products.

It runs about 455 sales centers and sells more than 200,000 products to roughly 125,000 customers, mostly pool builders, service companies, and retail stores. If a pool guy shows up at your house with chlorine and a new pump, there's a good chance it came off a Pool Corp shelf.

The stock is about 44% below its October 2025 high near $306 and down about 25% this year. It hit a 52-week low near $153 on Oct. 8. At a market cap of about $6.3 billion, you're paying roughly 16 times trailing earnings, versus close to 28 times at last fall's peak, for a business whose earnings have held roughly flat.

Why the Business Holds Up

Here's the part the selloff glosses over. In 2025, about 64% of sales came from routine maintenance and minor repairs on pools that already exist. Another 22% came from remodels and upgrades, and only 14% came from building new pools.

Once a pool is in the ground, the owner has to keep buying chemicals, filters, and replacement equipment whether the economy is strong or not.

The weak spot is new construction. The company estimates new in-ground pool builds fell to just under 60,000 units in 2025 from 62,000 in 2024, as high borrowing costs made homeowners think twice.

That's real pressure, but it hits the smallest slice of the business. You're buying a recurring supply stream with a cyclical piece attached, not the other way around.

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What Sank the Stock

If you only read the headline, second-quarter results in July looked fine. Sales rose 2% to $1.8 billion, and adjusted earnings per share (EPS) rose 4% to $5.38.

But gross margin slipped to 29.7% from 30.0% because the company couldn't pass all of its higher inbound freight costs on to customers, and management lowered its full-year GAAP EPS outlook to $10.66 to $10.96.

Then add a CEO change, and you can see why the market lost patience. Peter Arvan stepped down on May 4, and John Watwood, a longtime executive at industrial distributor Motion Industries who joined Pool Corp in January, took over.

Board chair John Stokely moved into an executive chair role. New leadership plus a margin squeeze is the kind of mix that makes shareholders sell first and ask questions later, and that's the discount you get to exploit.

The Numbers Behind the Thesis

Analysts expect third-quarter EPS of about $3.36, versus $3.39 a year ago, on revenue of roughly $1.47 billion, up about 1.5%. That's a low bar. The company has beaten EPS estimates in three of the last four quarters, with the one miss coming in the seasonally tiny fourth quarter.

You'll find Wall Street split. Goldman Sachs kept its Buy rating on Oct. 12 but cut its target to $215 from $247. Wells Fargo stayed at the equivalent of Hold on Oct. 16 and cut its target to $165 from $185. The average analyst target sits around $207, well above where the stock trades today.

You should know the balance sheet carries some debt, about $1.3 billion at the end of June.

Much of the recent increase went to buybacks, with $266.7 million of shares repurchased over the 12 months through June. In April, the board raised the buyback authorization to $600 million, which gives management plenty of room to keep shrinking the share count at these prices.

The Yield Finally Got Interesting

For most of the last decade, this stock yielded too little for you to bother with as an income buy. In April, the board raised the quarterly dividend 4% to $1.30 from $1.25, its 15th straight year of increases.

That's $5.20 a year, which works out to a yield of about 3.0% after the slide, up from under 2% a year ago.

The payout looks safe to us. The dividend uses a bit under half of trailing earnings, so the company can keep raising it even if profits stay flat for a while. Pool Corp has paid a dividend every year since 2004, and you're now getting a yield on a quality distributor that you rarely see on this name.

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