King of Sweden figured this out 500+ years ago to price cargo value for import taxes
1. You declare the assessed value of your asset, you pay the tax on your assessed value
2. The king has the right to buy the asset at the declared value
Lindy
$POOL
Investors try to predict which technology will win, which industry will be disrupted, or what the world will look like 10 years from now. With $POOL, you don’t need to answer those questions. You just need to believe that millions of people will still own pools.
Today $POOL generates a little over $5b in revenue and sells everything needed to keep pools running. Chemicals, pumps, filters, heaters, lighting, etc. It’s not a glamorous business, but that’s part of what makes it interesting.
If revenue grows just 5% per year, $5.3b becomes roughly $8.6b in a decade. $POOL doesn’t require a breakthrough product, a new technology or some dramatic change in consumer behavior.
What fascinates me is that every pool built today becomes a customer for decades. A pool is not a one time transaction because pumps break, filters wear out, heaters fail and chemicals need to be purchased year after year.
A homeowner might spend $100k building a pool. Once that money is in the ground, maintaining it becomes almost mandatory. Otherwise a pool will quickly turn into a pond. Nobody wants a six figure asset sitting in their backyard turning green because they decided to save a few hundred dollars.
I also think investors underestimate how valuable the installed base is. A restaurant can close, retailer can disappear, software product can become obsolete, but once someone digs a giant hole in their backyard and spends six figures building a pool, it stays there for decades.
That’s what makes the installed base so powerful. Every year new pools get added, but few disappear. The customer base accumulates over time, creating a larger stream of future maintenance, repair and replacement demand.
Most investors focus on new construction. I think that’s part of the story. What matters is the cumulative number of pools that already exist. In some ways, a 20 year old pool can be more valuable than a brand new one because it requires more repairs, more upgrades and more replacement equipment.
$POOL also benefits from inflation because if a replacement pump costs $500 today and $900 ten years from now, $POOL doesn’t need to sell more pumps to generate higher revenue. The same is true for filters, chemicals and maintenance equipment.
What makes the story even more attractive is capital allocation. If revenue grows 5% annually and management continues reducing the share count through buybacks, earnings per share can grow much faster than the business itself. Revenue might grow 60%, but EPS could potentially double.
Sometimes I think investors misunderstand what this company actually sells. On the surface they sell products, but reality they sell access to an installed base of millions of pools that require recurring spending forever. The products will change, the brands will change, the equipment will evolve, but the need to maintain a swimming pool won’t.
One thing I’ve noticed is that many of the best long term investments are businesses where management spends almost no time talking about AI strategy, crypto strategy, the metaverse or whatever the latest trend happens to be. Nobody asks whether pool chemicals will be disrupted by ChatGPT.
When I think about where this business could be in 10 years, I don’t think the assumptions required are particularly aggressive. If revenue reaches $8.5b to $9b, margins remain healthy and management continues buying back shares, it’s not difficult to imagine earnings per share being significantly higher than they are today.
That’s ultimately what attracts me to $POOL. You don’t need to believe in a revolutionary product, a new technology or some massive industry transformation. You simply need to believe that millions of people will continue maintaining their pools, replacing equipment and buying chemicals.
Sometimes the best investments aren’t the ones where the future is impossible to predict. Sometimes they’re the ones where 2036 looks remarkably similar to 2026. 🌹
Lee Kuan Yew abolished trial by jury in Singapore after determining that it was too easy for defence lawyers to appeal to racial and religious biases of juries in multicultural Singapore.
He writes in his memoirs how as a young lawyer he was able to get three clients acquitted who he was sure did commit murder. LKY writes that he "worked on the weaknesses of the jury -- their biases, their prejudices, their reluctance really to find four Muslims guilty of killing in cold blood or in a heat of great passion, religious passion, an RAF officer, his wife and child."
He writes "The judge was thoroughly disgusted. I went home feeling quite sick because I knew I'd discharged my duty as required of me, but I knew I had done wrong.”
Study after study shows that in multi ethnic societies, there is significant in-group bias on juries.
I know every generation has their class struggles, but let me tell you about the summer of 1990 when Supersoakers hit the market and only a few kids could afford them and the rest of us were hunted for sport.
compare to anthropic/spacex/openAI/ etc. " $GOOGL needed to raise ~$26M in total private capital before achieving sustainable +++ cash flow & profitability. Bcthe cobecame financially self-sufficient so quickly, it never needed to raise another round of capital prior to its IPO."