Michael Larsen, a director at A.O. Smith Corp (AOS), recently added 3,925 shares. The buy increased his holdings by 112 percent, and came to a total price of just over $274,000.
This marks the first insider buy at the company in the past three years. Over that timeframe, company insiders have been active and regular sellers of shares, particularly among company directors.
Overall, insiders own just under 1 percent of the company.
The manufacturer of heaters, boilers and water tankers has returned 14 percent in the past year, just edging out the S&P 500 after its recent selloff.
Both revenues and earnings have been growing in the high-teens over the past year, an indication of strong and steady demand. With a profit margin of 14 percent in a sector that requires expensive raw materials and labor, it’s clear that the company is performing strongly and will likely continue to do so.
Action to take: Investors can get a 1.6 percent dividend yield here, and are paying about 20 times forward earnings for a company that can likely perform well in both a roaring real estate market and a defensive environment.
For traders, the July $70 calls, last going for about $4.00, could offer traders a mid-to-high double-digit return on a continued move higher in shares in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.