Pool Corp Stock: A Buying Opportunity After the COVID Boom?

During their recent episode, Taylor, Carlisle, and Jonathan Boyar discussed Pool Corp Stock: A Buying Opportunity After the COVID Boom?. Here’s an excerpt from the episode:

[Jonathon] Yeah. Pool Corp. Another fresh look constituent.

Pool is a name that we profiled in 2009. We did a huge issue talking about investing in consumer-related stocks. We’re in the middle of a global financial crisis.

And that was a kind of a once-in-a-generational time. We had Marriott, $20. We had Pool Corp at like $20.

And it was a great success for many years. But it got way, way ahead of itself. And we stopped really doing any profiles of it in 2000.

During COVID, it got to 55 times earnings. And that was just absolutely ridiculous. And we’ve been watching it as it went from $500 a share to $400 a share to $300 a share to $200.

Now it’s $162, selling at 15 or 16 times earnings. Very little leverage. Very good management team.

Very good board. In a good business. And to us, it’s 16 times earnings, 15 times earnings.

We’re willing to take our chances. At 55 times earnings, that’s ridiculous. Everything has a price.

But I think Pool Corp is one that’s worth taking a look at.

[Jake] Isn’t it so funny how price drives narrative? Take Rawlins also recently. It always was a bug company.
And yet, it gets painted with this quality brush whenever the hell it got up to 60 times earnings or something. And now that it’s down, it’s like, oh, yeah, well, it’s just a bug company.

[Jonathon] I mean, I go back to what Buffett talks about some of his biggest mistakes. And one of them is not selling Coca-Cola when it was 60 times earnings in the last quality bubble we had, or second to last quality bubble we had. If you took the performance of Coca-Cola from 1998 till today, the operational metrics have been great.
The company is performing really nicely. But the return is half of that of the S&P 500. Because when you pay 60 times earnings for something, it’s very hard to make a profit.

And Buffett, fortunately for him, he did many things right. So it wasn’t a major sin. But it happens even to the best of us.

[Jake] There is something kind of sweet, though, about getting like, what is it, a third of his cost basis and dividends now every year or something. And you just every year you’re clipping. That’s pretty cool.

[Jonathon] Yeah. No, no, no. I mean, no one’s going to argue this has not been a great investment for him.
But he could have. The problem is he was so he’s so taxed. It’s a big opportunity cost.

It’s an opportunity cost, but he’s done he’s made many more good decisions than bad.

[Tobias] We discussed a little bit before we came on, but I was sort of interested in how Poole captured the imagination. It’s just such a funny company to run like that. It’s not like it’s an AI.

So it’s funny that it was like memeable through that period of time. What was the narrative? How do you daydream yourself to 50 times?

[Jonathon] Yeah, we paid much less attention to it then. I think if I had a guess is, listen, they people extrapolate current things to to infinity, you know, for the rest of time.

[Jake] And we still learn.

[Jonathon] Yeah. People are building not actually not even so much more than like during the prior to the global financial crisis. You know, I think it was 120,000 pools a year.

Normally you would do 80,000 pools a year. Now we’re doing 60. So you get back to a mean reversion.

So now they’re extrapolating it on the downside before they were extrapolating it on the upside. And that’s that’s just what that’s human nature. And I think if you can take three, four, five year view, you’ll be just fine.

I think it could be taken over. I’ll put that on record. You have low insider ownership.

You have very little debt. You have a well-run company and you have a shareholder base that must be exhausted.

[Tobias] Yeah. Do they do any buybacks or anything like that at this level?

[Jonathon] I think they’re starting to do it. I’m not 100 percent sure, but it would be a good use of funds. It’s really not in the video like buyback.