Home Stock Josh Brown: this 150-year-old company that ‘owns its space’ is a buy

Josh Brown: this 150-year-old company that ‘owns its space’ is a buy


A.O. Smith Corporation (NYSE: AOS) gained more than 60% in the stock market last year, and Ritholtz Wealth Management’s Josh Brown is convinced 2022 will be another great year for the water heaters and boilers manufacturer.

Brown explains why he bought AOS

On CNBC’s “Halftime Report”, Brown said A.O. Smith was a 150-year-old company that continues to see strong demand for its products. Explaining his reasons for buying the stock, he said:

A.O. Smith owns its space. We’re under-housed in the USA. We’re going to build more and more homes demographically. Every one of them needs a water heater. They’re also in commercial, and they’re in India and China as well. So, I think there’s a lot of room for this stock to work.

In these two markets, A.O Smith has gone beyond its traditional business and into water purifiers that Brown says could also serve as a catalyst for the stock.

Why else does he like AOS?

The Wisconsin-based company generates about 85% of its annual sales from replacements, making up for a promising means of recurring revenue. Other reasons why Brown likes AOS include its sizable buyback programme and a dividend that continues to grow year after year. He added:

This stock has been on fire since the start of the pandemic. It’s a classic compounder with a market cap of only $13 billion. I’m almost surprised Berkshire Hathaway isn’t involved or the full owner of this already. But I wanted to be involved, so I bought it.

Among his other picks for 2022 is Roblox Corp that Jim Cramer also recommends as a top junior growth stock. Morgan Stanley currently has a price target of $150 on RBLX that represents an over 50% upside from here.  

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