This article is for education purposes only, and not to be taken as advice to buy/sell. Please do your own due diligence before committing to any trade/investment.
All eyes were on the Shanghai Cooperation Organization (SCO) summit as China and its closest allies (namely Russia and India) gathered.
China was the host, and an agreement was reached to establish a development bank aimed at reducing members’ dependence on the US dollar.
Shortly after, China put on a spectacle via its Victory Day Parade to commemorate its victory over the Japanese in WW2.
It’s clear that China is using this moment to showcase its might and a possible shift in world order.
While knowing what could happen in the very long term could be useful, shall we focus on the shorter term and find opportunities that we can capture?
After a quick screen, this stock looks worthy for a position trade. Let’s dive right in!
Brief History of A.O. Smith
Source: aosmith.com
A.O. Smith is a 150 year-old company. Not many companies can survive this long.
The company began as a small machine shop producing metal parts for baby carriages and other hardware specialties. Its business began to evolve as bicycles became more common. Through this pivot, A.O. Smith became the largest bicycle parts manufacturer in the world.
As automobiles became more common, the company pivoted to produce auto frames for Chevrolet and Ford.
Did the company rest on its laurels? No.
It diversified by entering the water industry, providing heaters, purifiers, and treatment solutions.
With re-invention happening several times across the company’s lifespan, has this reaped financial rewards?
Business Model and Financials
Source: tradingview.com
Let’s look at 2 key metrics from the image above – total revenue (in blue) and net income (in yellow).
Did you notice that the total revenue of A.O. Smith was falling from 2018 to 2020?
Things improved in 2021 onwards, bringing its total revenue to $45b, enjoying growth of between 2.6% and 22.2%! This increase in its total revenue in consecutive years is pleasing.
Has its net income managed to grow alongside?
Its net income was more inconsistent, growing and shrinking quite dramatically from 2018 to 2024.
One positive you can take away from its net income is that A.O. Smith has not suffered losses throughout.
Is this a strong enough reason to buy its shares for a position trade?
It would be better to analyze its share price.
Technical Analysis on A.O. Smith (NYSE: AOS)
Here’s the chart of A.O. Smith‘s shares.
Can you tell that its shares used to be in a strong downtrend before turning into a super strong uptrend?
There’s no need to add a moving average or trendline. You can tell that this is an uptrend by comparing the number of blue (outline and solid) candles against those in red (outline and solid).
The share price is in an uptrend when there are more blue candles.
What would you want to do when a stock is in an uptrend?
You’ll want to look out for buying opportunities. And that’s what I’ll be doing here.
Without the need to plot support and resistance, I can tell whether the time to buy the shares of A.O. Smith is ripe for a position trade.
How?
By looking at the 2 main proprietary indicators – the arrow and Trend Impulse Factor indicator.
Do you see a green arrow under the latest candle of A.O. Smith‘s shares?
This tells me that this is a fresh bullish move.
But is this bullish move likely to be sustained?
Enter the Trend Impulse Factor indicator.
When the bar of the Trend Impulse Factor indicator is dark green in color, it suggests that this bullish move is likely to be sustained. Now, let’s have a look at the color of the Trend Impulse Factor indicator’s bar.
It’s not the time to buy its shares for a position trade yet!
However, I think that a buying opportunity could appear in the coming days, so I’m watching this stock closely.
Conclusion
Source: unsplash.com
China is a growing world super power. There’s no denial.
But this will not affect A.O. Smith in the short run. A look at its financials is encouraging as its total revenue has been climbing in recent years.
The chart of its share price is also looking great! But what’s stopping me from buying its shares for a position trade?
Thanks to the TradersGPS (TGPS) system, I’m able to screen the US stock market and find this stock in under a minute.
Additionally, both the arrow and Trend Impulse Factor indicators have been tested and proven. They form the TradersGPS (TGPS) system to help you decipher if a stock is ripe for a position trade. You won’t have to feel in the dark and make wild guesses.
Although it isn’t time to buy its shares yet, I’m keeping A.O. Smith in my watchlist because the opportunity to buy its shares could come in a few days time.
What are your thoughts?
Share your thoughts with me below!
