What Does Buffett Know?

When the rest of Wall Street was riding the AI-fueled tech rally last year, the Oracle of Omaha was quietly doing the opposite, selling more stocks than he bought and stacking cash to the tune of a staggering $347 billion. While the S&P 500 was hitting fresh highs and investors were throwing money at growth stocks, Buffett was biding his time.

That behavior might seem unusual for most money managers, but for Buffett, it’s par for the course. He’s never been enamored with flashy tech names or momentum trades. His preference? Under-appreciated businesses trading at bargain prices, especially those with durable competitive advantages. Once he finds one, he holds on tight. That long-term, value-driven mindset has helped Berkshire Hathaway post average annual returns of nearly 20% for over 50 years.

With the S&P 500’s Shiller CAPE ratio recently climbing above 37, a level it’s only breached a couple times in history, Buffett’s caution starts to look downright prophetic. Expensive markets rarely stay buoyant forever, and Buffett has a keen eye for knowing when the math just doesn’t add up.

Last year’s market euphoria may have been good for index-tracking investors, but it also set the stage for a pullback, one that arrived earlier this year. While many portfolios took a hit amid renewed worries about inflation, tariffs, and slowing consumer demand, Buffett’s defensive posture helped Berkshire dodge much of the damage.

And now, after 10 straight quarters of net selling, Buffett is finally nibbling at something new.

Key Points

• While most investors chased tech stocks during the rally, Warren Buffett stayed cautious.

• Despite trimming other positions, Buffett quietly bought and then significantly increased his stake in Pool Corp.

• Pool Corp has a wide distribution network, strong customer relationships, and proprietary products.

A New Name in Buffett’s Portfolio

Buffett has trimmed some of his biggest positions in recent quarters, including stakes in Apple and Bank of America, but both still remain among Berkshire’s top four holdings. His reasoning, as he explained in a recent shareholder letter, is simple: “Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities.”

But in the third quarter of last year, one name did catch his eye, and it wasn’t a tech darling or a big bank. It was Pool Corp. (NASDAQ: POOL), the world’s leading distributor of swimming pool supplies and equipment.

Initially, Buffett initiated a small stake. But that wasn’t the end of it. In the first quarter of this year, Berkshire dramatically increased its position by 145%, bringing its total holding to 1.46 million shares. While that’s still a tiny piece of the overall Berkshire pie, less than 0.2% of the portfolio, the rapid buildup suggests Buffett sees long-term potential.

Why Buy Pool Corp?

It may seem like an odd pick at first glance. Pool Corp. has faced some headwinds lately.

Discretionary spending has slowed, and uncooperative weather in key markets like Texas and Florida hasn’t helped either. In its most recent quarter, the company reported a 4% decline in net sales and a 29% drop in earnings per share, excluding a one-time tax benefit.

But short-term bumps like these don’t usually scare Buffett away. He’s looking much further down the road, and he’s likely spotting what many others are missing.

For starters, Pool’s business is naturally seasonal and economically sensitive, but those challenges aren’t permanent. The company remains a dominant force in its industry, thanks in large part to its wide distribution network, deep relationships with commercial customers, such as hotels, gyms, and municipalities, and its own branded products and water-testing technology.

Buffett’s Favorite Word, Moat

If there’s one thing that consistently wins Buffett’s admiration, it’s a moat, and Pool Corp. has a wide one.

With decades of operating experience, a strong portfolio of proprietary products, and customer relationships that are hard to replicate, Pool has created a durable ecosystem that newcomers would struggle to compete with. That kind of edge doesn’t just protect market share, it generates recurring revenue.

Buffett likely saw the stock’s recent slump as a gift. After falling to a multi-year low last year, shares bounced, then dipped again, offering another window to accumulate. This is classic Buffett behavior, buy quality businesses when they’re on sale and wait patiently as the rest of the market catches up.

What Happens Next?

Buffett rarely acts without a clear thesis. And while we can’t know exactly what he’s thinking, the Pool investment fits his playbook: dominant market position, temporary headwinds, long-term upside.

In time, consumer confidence will return, weather patterns will normalize, and demand for pool supplies and services will rebound. When it does, Pool Corp. may well deliver meaningful growth, not just in sales, but also in investor sentiment.

Buffett’s timing might seem early to some, but that’s often how he outperforms. He plants seeds when others are distracted, waters them while markets fixate on the next hot trend, and reaps the rewards when patience pays off.

If history is any guide, Pool Corp. may not stay under the radar for long, and Buffett’s bet might well end up making waves.