Less-discretionary maintenance companies in the consumer sector offer investors an opportunity to invest in more stable businesses during a slow-growth macroeconomic environment, with the potential of a pickup if the environment improves, says St. Denis J. Villere III, Investment Advisor and Partner at St. Denis J. Villere & Company, LLC.
“In this environment, as I mentioned, in the consumer sector we’re buying companies where people have to use the products, if that makes sense. They’re almost forced to buy them rather than being a true discretionary purchase,” Villere said. “It’s boring, and we like that.”
He says Pool Corp. (POOL) is the nation’s largest distributor of swimming pool construction products, as well as parts and maintenance, which are two-thirds of its sales. Villere says consumers are not expected to neglect their swimming pools during a sluggish environment, and the recurring revenue from parts and chemicals is attractive to him.
“We recently visited with management, CEO Manuel Perez de la Mesa, and he said that based on what’s going on with the chemicals and part-replacement business… he thinks that they can grow that business in the 15% to 20% over the next five years assuming no recovery at all in housing,” Villere said.
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