This Warren Buffett Stock Has Returned Over 42,000%. Should Investors Buy the Stock Now?

Justin Pope, The Motley Fool

Sun, Apr 27, 2025, 5:32 PM 4 min read

It's never too late to invest in an exceptional stock. Just ask multibillionaire Warren Buffett, whose holding company, Berkshire Hathaway, opened a stake in Pool Corp. (NASDAQ: POOL) in the third quarter of last year. The world's largest wholesale distributor of swimming pool equipment, parts, and supplies has already made shareholders quite wealthy.

The stock has returned over 42,000% over its lifetime.

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What has made Pool Corp. such a successful investment, and should you buy the stock now? Here is what you need to know.

Pool Corp. serves more than 125,000 wholesale customers. Most of its business is in the United States, but the company also operates in Canada, Mexico, Europe, and Australia.

A swimming pool is a significant investment, especially an in-ground pool, which can cost over $100,000 to build and install. Pool Corp. generates revenue from three aspects of pool ownership:

• New construction and installation: 15% of 2024 revenue

• Upgrades and remodels: 20% of 2024 revenue

• Supplies and maintenance: 65% of 2024 revenue

A key aspect of Pool Corp.'s business model is that each new pool generates a recurring revenue stream, which represents a larger portion of the business as Pool Corp. installs more pools. Recurring revenue from supplies and maintenance was 65% of 2024 sales, up from 60% in 2014.

There are more than 11 million bodies of water in the United States alone, including 5.4 million in-ground swimming pools. Pool Corp. has a competitive advantage as the leader in this fragmented industry, routinely acquiring small competitors to expand its market share.

Pool Corp. generates more cash flow as the business grows larger and profit margins expand. The company requires minimal investment, so management allocates most of its cash flow to stock buybacks and dividends, thereby further boosting earnings per share and investment returns.

It's a wheel that spins round and round, generating remarkable results for shareholders over the years.

Swimming pools are a luxury purchase for most, so new pool installations, the first spoke in that spinning wheel, are susceptible to economic forces. Consumer sentiment declined over the past year, and the situation has worsened with higher interest rates, which increased borrowing costs and could slow home construction, key drivers of new pool installations.