Pool Corporation

In his first quarter as CEO of Berkshire Hathaway, Greg Abel sold 15 stock positions that were originally initiated by Warren Buffett, signaling a willingness to chart his own course. The divested holdings included long-time winners like Visa, Mastercard, and Amazon, as well as recent underperformers such as Pool Corp., Diageo, and Domino's Pizza. Abel also made his biggest new buy in Alphabet, which pays only a 0.2% dividend, while exiting higher-yielding names like Lamar Advertising, Diageo, and Pool, suggesting less emphasis on dividend income. Berkshire's cash pile grew from $373.3 billion to $397.4 billion during the quarter, indicating a preference for building liquidity over chasing yield. The moves suggest Abel is not hesitant to sell either winners or losers if he does not foresee market-beating returns, though it remains to be seen whether this pace of change continues.

Pentair reported adjusted earnings of $1.14 per share for the second quarter of 2026, beating the Zacks Consensus Estimate of $1.12 by 1.8% but falling 18% from $1.39 a year ago. Revenue declined 17% year over year to $932.6 million, missing the consensus estimate of $1.012 billion, as pool sales plunged 42% to $246.6 million due to a sharper-than-anticipated inventory correction by major channel partners and softer end-market demand. Flow sales rose 5% to $263.7 million and Water Solutions sales slipped 5% to $422 million, with both segments posting improved return on sales. Pentair also announced an agreement to acquire Taco Group Holdings for approximately $1.4 billion, expected to close in the fourth quarter of 2026 and add 10 to 15 cents to 2027 earnings per share. The company initiated third-quarter adjusted earnings guidance of $1.05 to $1.08 per share and reaffirmed full-year 2026 adjusted earnings of $4.60 to $4.80 per share, with sales projected to decline 4% to 7%.

Pool Corporation shares fell 5.2% following its removal from multiple Russell growth indices, including the Russell 1000 Growth, Russell 3000 Growth, Russell 2500 Growth, and Russell Midcap Growth, as part of FTSE Russell's annual index reconstitution in late June 2026. The broad exclusion may affect how index-tracking funds and institutional investors hold the stock, potentially reshaping liquidity and ownership patterns. The company's upcoming second-quarter 2026 earnings release on July 23 is now seen as a key catalyst, with management's outlook compared to its current 2026 earnings per share guidance range of US$10.87 to US$11.17 under scrutiny. Analysts project revenues of about US$5.9 billion and earnings near US$466.4 million by 2029, though more optimistic estimates reach US$6.1 billion in revenue and US$492 million in earnings, contingent on housing-related demand and discretionary spending trends.

Bell Global Equities Fund sold its entire position in Costco Wholesale Corporation during May 2026, ending a holding period of more than 12 years. The fund said Costco’s forward earnings multiple of approximately 45 times meant the risk-reward profile was no longer compelling, especially as many other high-quality companies have seen their valuations de-rate materially lower. The position delivered a total shareholder return of roughly 1,000 percent, or about 21 percent compound annual return, over the life of the investment. The fund also exited Pool Corporation following the unexplained departure of its CEO and Copart due to signs that a growth turnaround had not yet materialized. Bell Global Equities Fund will continue to monitor Costco for a potential reinvestment opportunity.

S&P Dow Jones Indices removed The Campbell's Company and Pool Corporation from the S&P 500 on June 22, replacing them with semiconductor and electronics names. Both stocks now reside in the S&P SmallCap 600, triggering mechanical selling by index funds that has pressured their share prices. Campbell's offers a dividend yield above 7%, supported by a 51-year payout streak and the Rao's brand, which surpassed $1 billion in trailing-12-month net sales, though its dividend growth has been minimal. Pool Corp. yields around 2.4% but has raised its dividend for 22 consecutive years, with a decade-long annual growth rate of roughly 17%, driven by a business model where about 60% of revenue comes from maintenance and repair. The removals reflect index rebalancing rather than business deterioration, potentially creating opportunities for patient dividend investors.

We are highlighting three consumer discretionary stocks that we consider risky: Peloton, Pool, and Planet Fitness. Peloton has seen its earnings per share decline by 22.3% annually over the past five years, and its free cash flow margin is expected to drop by 3.6 percentage points in the coming year. Pool's revenue growth of 4.4% annually over the last five years lagged peers, and its free cash flow margin of 7.5% limits investment capacity. Planet Fitness faces shrinking same-store sales and a forecasted 6.6 percentage point decline in free cash flow margin, indicating rising capital needs.