Warren Buffett is not known for buying the most exciting businesses out there, but he is known for making some of the best investments. It's a thought to bear in mind when considering investing in Pool Corp. (POOL 1.06%), one of Berkshire Hathaway's holdings.

Here's why.

Why Pool Corp. is a great Buffett stock to buy

The case for buying Pool Corp. is simple. The company holds a dominant market share in a highly fragmented yet growing market. Remember that, even if new pool construction growth is slowing, the installed base of pools is still growing, creating opportunities for Pool Corp. 

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In fact, almost two-thirds of its sales come through the maintenance and repair of existing swimming pools, with items such as chemicals, equipment, parts, and supplies used to maintain pumps, heaters, and filters.

These factors come together to create a business with relatively high profit margins (for a distributor) and consistently high return on invested capital (ROIC). It implies that every new sales center it invests in, or smaller distributor it acquires to build scale, tends to generate a good return.

Data by YCharts.

A long-term growth prospect

Observant readers will note that Pool's margins and ROIC declined in 2022, but this is due to a natural correction from the artificial boom in stay-at-home spending created by the pandemic lockdowns. About 15% of its sales in 2024 came from new swimming pool construction, and the slowdown in this area has impacted Pool Corp.'s sales growth.

Still, as noted above, the installed base is growing, and so should Pool Corp.'s revenue from maintenance and repair. As such, when the new pool construction market inevitably bottoms, Pool Corp. should get back on its long-term growth path.