Warren Buffett's Latest Undervalued Buy: Why Pool Corp Is a Contrarian Opportunity for Long-Term Gains

Warren Buffett's Berkshire Hathaway has long been celebrated for its contrarian value investing approach, and its recent accumulation of Pool Corp (POOL) shares underscores this philosophy. Despite macroeconomic headwinds, including a weak housing market and rising interest rates, Buffett has steadily increased his stake in the pool services giant, acquiring nearly 3.5 million shares by Q2 2025 and pushing his ownership to 9.27% of the company. This strategic bet reflects a deep conviction in Pool Corp's recurring revenue model, operational resilience, and long-term growth potential-factors that position it as an undervalued opportunity for patient investors.

A Recurring Revenue Powerhouse

Pool Corp's business model is anchored in recurring revenue streams from chemicals, fertilizers, power equipment, and repair services. These offerings cater to the maintenance and aftermarket segments of the pool industry, which have proven more resilient than new construction amid economic uncertainty according to the company's Q3 earnings call. For instance, in Q3 2025, the company reported net sales of $1.5 billion, driven by sustained demand for maintenance products and peak season activity. Its gross margin expanded to 29.6%, bolstered by pricing power and supply chain efficiencies.

This stability is critical in a market where discretionary projects like new pool construction face headwinds. While chemical sales dipped 4% year-over-year due to deflationary pressures, building materials sales grew 4%, reflecting strong demand for remodeling and repair work. By focusing on these recurring revenue streams, Pool Corp has insulated itself from the volatility of new construction cycles, a trait that aligns with Buffett's preference for durable, cash-generative businesses.

Contrarian Valuation Metrics

Despite its robust fundamentals, Pool Corp trades at a valuation that appears attractive to value investors. As of September 2025, the stock's price-to-sales ratio stands at 1.7x, and its price-to-earnings ratio is 22x-both below their five-year averages. This discount is partly due to broader market skepticism about the pool industry's exposure to interest rates and consumer sentiment. However, Buffett's purchases suggest he views this as an overcorrection.

Berkshire's investment in Pool Corp has grown steadily since Q3 2024, with the largest single-quarter purchase occurring in Q2 2025, when it acquired 1.99 million shares. The total value of the position now exceeds $1.01 billion, though it currently sits at a 25% unrealized loss compared to the purchase price. This discrepancy highlights Buffett's willingness to tolerate short-term volatility for long-term gains-a hallmark of his value investing strategy.

Long-Term Growth Catalysts

Looking ahead, Pool Corp's strategic initiatives provide a clear path for sustained growth. The company's investment in digital tools, such as the Pool 360 platform, has driven 17% of Q3 2025 sales, reflecting strong customer adoption. Additionally, its expansion into franchise locations-now totaling 303 stores-has enhanced its geographic footprint and operational scalability according to earnings data.

Analysts project earnings growth at a compound annual rate of 6.5% and revenue expansion of 4% annually, though these figures lag behind broader market averages. However, Pool Corp's high-quality earnings, attractive dividend yield, and strategic focus on technology and private label offerings position it to outperform in a low-growth environment. For Berkshire, this aligns with its long-term horizon, as Buffett has historically prioritized companies with durable competitive advantages and strong management.

Conclusion

Warren Buffett's growing stake in Pool Corp is a testament to the company's unique value proposition. By leveraging its recurring revenue model, operational efficiency, and strategic investments, Pool Corp has navigated macroeconomic challenges while maintaining its market leadership. For investors willing to adopt a long-term perspective, the current valuation discount and Buffett's contrarian confidence make Pool Corp a compelling opportunity-one that could deliver substantial gains as the market re-evaluates its long-term potential.