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Opinions Brett Girard, CPA, CA, CFA
A.O. SmithAOSBUYSep 16, 2020
Water boilers and filtration technology. Increasing penetration into India, and this will be the catalyst. Grows free cash flow by about 12% per year. Dividend has grown by about 22% over the last 5 years.
$51.78
Stock price when the opinion was issued
$58.24
As of Jun 18, 2026. Market Open.
misc industrial products
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Premium contentTOP PICK
A. O. Smith Corporation, with headquarters in Milwaukee, Wis., is a global leader applying innovative technology and energy-efficient solutions to products manufactured and marketed worldwide. The Company is one of the world's leading manufacturers of residential and commercial water heating equipment and boilers, as well as a manufacturer of water treatment and air purification products. Social media mentions are up 500% in the past 24h.
misc industrial products
HOLD
Lower multiple at 18x earnings. Water purification as well as fuel-efficient water heaters. Lower price to book and price to sales. Dividend growth rate in 15% range.
David DriscollOwned
misc industrial products
BUY
They make water boilers for homes and businesses. Has owned this since 2014. Buy now on weakness. They US their biggest market, but they're also growing in China and India. He's not worried about a recession, because homeowners are chained to their homes and won't move, so they will have to replace their water heaters/boilers eventually.
misc industrial products
BUY
Commercial and residential water heaters and purification systems. Still likes it. Not a good entry point right now, but getting close. Has not been disappointed owning this. Good chance for more demand with infrastructure renewal. New homes are also a tailwind. Good long term investments. Buy around 20% off highs, so around high $15.
David DriscollOwned
misc industrial products
HOLD
Fundamentals are still good. Positive organic growth from US water purification business. Increase in residential water heaters in US. Flattened losses in China and India. Trading at 24x earnings, not that bad in today's market. Dividend has continued to grow. They'll be part of any breakout in the economy.
David DriscollOwned
misc industrial products
BUY
You have to think not only about their water purification in India and China. They sold off inventories within China so they could sell upscaled equipment that are energy efficient. Their North American side of the business is also not to be neglected. Their sales here are 50% of the business with water purification, water heaters and air purification. In India, they are building revenue and will start making profit there too. The dividend continues to grow above average, and earnings for next year are between 2.40 -2.50 a share which is 20x earnings. If it goes down $5, he would be interested in adding to a position.
David DriscollOwned
misc industrial products
HOLD
A water and air purification as well as water-heater seller. There were issues with China but India is a bigger growth opportunity. They raised dividends by 12% and the business will continue to build out. Even without China, the return on invested capital is 28%. Water purification is a secular trend. In US, the demand is still there.
David DriscollOwned
misc industrial products
PAST TOP PICK
(A Top Pick Oct 12/18, Up 2%) They have come back to levels before the China war. China is only 1/3 of the business' revenue. They also have business in India and US for water purification, heating, and others. This company continues to be working in the water purification sector. They raised dividends by 9%. This will depend on how the US-China trade war wraps up.
David DriscollOwned
misc industrial products
WATCH
The predominant manufacturer of water heaters in North America. A business that is relatively stable, with replacements and new housing starts. They also have exposure to China, where they are a major supplier. The growth has been good in China, but he does not know what the future is there as China has built empty cities. Only when the buildings are occupied do their products get purchased there.
misc industrial products
PAST TOP PICK
(A Top Pick Oct 12/18, Down 8%) Problem with slowdown in China where 35% of their revenue comes from. The demand is not growing at the same pace as before. Indian air and water purification business revenue is up 30% and this is their next move.
David DriscollOwned
misc industrial products
PARTIAL BUY
China sales make up 1/3 of sales. Shortsellers have targeted it. Company says shortseller's information is not true or fair. Starting water treatment business in India. Next year will be sluggish. Plenty of cash available, and they'll buy back shares. Once China gets straightened out, they'll be fine. Could buy a half position today. Yield is about 4.5%.
David DriscollOwned
misc industrial products
SELL
They sell water and gas heaters to the US residential market, but their expansion into China has caused pain with a big drop in Q1 revenues. They're very good managers in a niche market. Trades at 20x earnings, but growth has really softened. Share price is too high. The downside will come from weakening US home sales. Other headwinds: China tariffs. He'd exit here.
misc industrial products
