I had hold the POOL for long time, over 10 years. Let me tell you their sales has nothing to do with the Housing market. POOL's growth is mainly from take over smaller operators and make retailer more efficient. the sales repeats it growth year by year, because they dominated market hence can ask hike price as the margin requires. I am sure they will be back to their all time high soon. Just look at their price line in last 10 years, you will know what I mean. Even 9.11 did not stop it to go up.
you can use your 101 way to value economics. But having this stocks for 15 years, I must say the cyclicality of the this stock is not that obvious compare to others. You can so it with more scientific way, run a statistics test see what is the stock price increase vs the economic growth rate, I can tell you the coorelation is very low, much lower ten other stocks.
By judging this few days stock preformance, my conclusion is that the stock beta is higher then it was. I think it has to so with computer trading since POOL becomes part of S&P.
I don't know what a professional basher is.
My advice if anyone cares is stay out of the market entirely if you are a trader or speculator - it's too risky right now.
In the overall market, what you are seeing right now is sometimes called a "bounce" or an "upleg" or as Jesse Livermore called it a "natural rally". This "natual rally" could turn into an uptrend but hasn't yet. In my opinion, until the DJA breaks above 11301 the overall trend is still downward - the NASDAQ has to break above 2190.
If this happens and they break out upward and they continue upward, only then would I call it an "upward trend." If that happens you should be able to buy back into Pool at 44-46 - the difference from 38-40 is the insurance you pay to make sure you are right.
An almost certain way to go broke is to try to catch tops and bottoms of a move.
"First you must form an opinion of the next move of importance. But don't act on that opinion until the market confirms that you were right." Jesse Livermore
Sorry I didn't make my point well.
What I mean is suppose you are an institution with ten million dollars to invest and you have the choice between A, B, and C, all in different industry groups but all roughly the same. If the stock prices were equal, which company would you invest in? The answer is: it depends. During times of cheap money, A may well have the most growth potential. But under higher interest and economic turmoil, B and C are "safer".
This may explain why Pool's shares have declined - it's not because of earnings or projections, which are good. I'm just trying to figure out why and this to me makes some kind of sense.
It also makes sense market-wise historically - growth stocks fair poorly duing times of economic hardship and best when the economy if moving steadily up.
Pool's stock hasn't crashed - at it's recent low it had lost only about 26%. I think that is because of the risk of a severe economic slowdown - company A types are losing investors who want to "wait and see".
If the economy doesn't crash, and by Jan 2007 looks like it has recovered, Pool will once again go up. My best guess is that between now and the end of October, you will see Pool trading in a narrow range between 36-44, and depending on the economy will break out either up or down from there.
I would rather wait for the breakout that have my money tied up in a choppy market.
"There are only 4 or 5 times a year when you should allow yourself to trade. You can beat a horse race but no one can beat the races." Jesse Livermore
The fact that Pool survived the last recession is a huge plus. Most small companies go under but Pool grew and their stock went up - good management.
The prices though are not so important in that time - intitutional buyers don't mess with stocks in the 5-10 dollar range, so you didn't see institutional buying. Now Pool is one of the big boys trading in the 30-50 range and institutions own 92% of the shares - which means Pools's business in being evaluated by a different standard. If institutional ownershiop goes down, it may only mean they think another company's stock will return more or they may have decided that Pool's upside growth potential has decreased so they are not such a bargain anymore. Keep in mind that Pool is no longer a small company selling pools and pool equipment - now every facet of their business in being watched - if sprinkler sales go down, that is part of Pool business now where it wasn't 10 years ago.
Also, there is good and bad about having a monopoly or near monopoly. If the industry you are in goes down, so does your stock - look at Microsoft to see this point.
The market is in a war right now to see which way it wants to go; however, 9 of the last 10 recessions have been after a large upward spike in oil costs, all in the last 25 years have been preceded by an inverted yield curve in the bond market, and all of them have been led by a slowdown and cooling of the housing market.
My advice is get out of the market altogether right now - no longs or shorts. This should all come to a head around October/November of this year. I'd either pick my spots and trade for weekly gains either up or down or just sit out and wait for a better spot.
"No one can say for sure how far down a stock will go once it starts down." Jesse Livermore
I would think just the mere speculation that Home Depot would consider getting in would be enough to cause a little concern. You're talking a whole different company than when Hughes sold their pool division to SCP. It's more a matter of commitment and good management more than anything else. I would think at the very least it would drive profits a little lower. But that is pure speculation and we know that never influences the market...right?
I think there are a lot of investers on the sidelines waiting to see who they buy next or at least the rumor that they will.
If POOL is Company A, who are Companies B & C?
They don't have much competition, if any.
They raise prices to cover cost.
HD/Hughes could cause a problem at some point, but who knows when that will happen.
HD/Hughes will get their assss kicked by POOL. Hughes already did!
For that mater it would be Pool that could move into the plumbing biz.
Pool is a veteran of war, they have experience in fighting strong competition.
Professional builders buy very little from the HD
Pool is already moving into Europe
The Swimming pool market in the USA has upside for years to come. Every new pool is a new customer for life. In other words for every pool that is now in the USA add every new pool build or sold to the total every year. Its up up up
don't over think it!
If you worry about yesterday's failures, todays successes will be few.
I can see how what you're saying could hurt a company, but you're missing something. If POOL is Company A, who are Companies B & C? They don't have much competition, if any. HD/Hughes could cause a problem at some point, but who knows when that will happen.
Think about this - how have most homeowner's over the past 5 years been able to pay for upgrades? Refinancing. Take a 300,000 home that has a 200,000 mortgage. You could refinance 80% and pocket $40,000 and build your pool and buy your spa. But if that same home drops in price (along with getting lower appraisals beause the appraisers aren't adding that extra 10% anymore but actually subtracting it) and your home is appraised at 260,000, well now you can only refinance 208,000. After costs, you net about 6000.
Keep an eye on home refinance numbers - that's the key to consumer spending. The glory days of living high on the equity in your house are going fast, and will be dead within 6 months. You will see also a slowing of new home sales as prices decline, and a rise in rents. Without home sales, either new or used, think of all the businesses that are affected...labor, aspahlt, carpeting, drapes, tile, refridgerators, plumbing, ovens, real estate agents, loan officers, banks, ... and on and on.
What is driving us into a near recession is high energy costs combined with a cooling housing market...because under it all it was the housing market and all it supports that has driven the economy the past 5 years.
Correct me if I am wrong, but wasn't Pool's biggest increase during all the aquisition's over the last several years? Are there any large players in the industry left for them to buy? Do you think the recent article in the Pool and Spa News that Home Depot/Hughes is looking into getting into the game has any effect on the current downturn?