Munger Mode rating: 4 out of 5 — Buy. Our own rating from the research report below, on business quality first: moat durability and management, with price separating the top three.
We have spent our lives looking for businesses that sell something people must buy, through channels competitors cannot easily penetrate, at returns on capital that stay high decade after decade. A. O. Smith is one of the rare industrial companies that passes that test — not because water heaters are glamorous, but precisely because they are not. Nobody brags about their water heater at a dinner party, and nobody postpones replacing one when it fails. That combination — invisible, essential, replacement-driven — is where durable franchises hide. The stock closed at $59.91 on July 30, 2026, down from a 52-week high of $81.87 and near its 52-week low of $54.16, after the company trimmed full-year guidance alongside a second-quarter earnings beat. The market is preoccupied with a soft U.S. housing market and a genuinely ugly situation in China.
Recent filings analysed: 8-K (2026-07-30), 10-Q (2026-07-30), 8-K (2026-06-22), 8-K (2026-05-19).
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