In this article, we will take a look at the 5 stocks most affected by inflation. If you want to see more stocks in this selection, go to the 10 Stocks Most Affected by Inflation.
5. Pool Corporation (NASDAQ:POOL)
Number of Hedge Fund Holders: 42
Pool Corporation (NASDAQ:POOL) is a Louisiana-based distributor of equipment and supplies for swimming pools along with other leisure products. The company has the distinction of distributing over 200,000 national brand and private label products belonging to over 2,200 vendors to nearly 120,000 wholesale customers as of 2022. This makes the company the biggest distributor of swimming pool-related wholesale products in the world, as it primarily caters to the needs of residential customers.
Pool Corporation (NASDAQ:POOL) was one of the beneficiaries of the COVID-19 pandemic, as lockdowns and restrictions limited the movement of people and caused them to shift their focus to recreational activities like swimming. However, the uncertainty in the macroeconomic environment due to rising inflation rates has led to a sharp decline in the discretionary spending of customers, adversely impacting the demand for Pool Corporation’s (NASDAQ:POOL) products. Furthermore, employees are now getting called back to full-time work, which is also not playing in Pool Corporation’s (NASDAQ:POOL) favor. The management anticipates Q4 2022 gross margin to decline by 1.5%-2% in comparison to the last year and has also lowered the full-year earnings guidance.
Here’s what RiverPark Funds said about Pool Corporation (NASDAQ:POOL) in its Q2 2022 investor letter:
“Those of you who own a backyard pool already know the Pool Corp. story quite well. (Honey, why is the pool water green?) Those who don’t own a pool, well, we recommend a little rent-seeking on your neighbor’s pool by owning these shares. The Pool Corp. strategy is beautifully simple; build a pool and become its customer for life. Once the major discretionary expenditure of building a pool is made, that high-maintenance asset becomes an annual annuity for your local pool service company. Increasingly, that local pool service company could well be owned by Pool Corp.
Those who own older pools know quite well that pool maintenance is much more involved (read: expensive) than just annual chemicals in the early years. Once a pool reaches its early teen years (often sooner), maintenance reaches a very different level of (read: expensive) when every part of the pool’s filtration system wears out. As the years progress, then pool/backyard rebuild kicks off. Well, that original pool becomes a brand-new second pool. Rinse and repeat. Your local pool service company is assuredly not the lonely Maytag repairman…” (Click here to see the full text)
