A.O. Smith (AOS-N)

Water filtration and boilers. Big trend around the world with population growth. Stumbled on sales in China, whose economy is struggling. Moving into India, where it's been a great success. Future is bright. Add to your position if you're not already overweight.

Dividends grew 13% last year, 11% per year over 5 years, 35% per year over 10 years. Getting paid to wait. Sometimes the market just doesn't recognize the value of a company, and then some catalyst (impossible to know what or when) comes along to unlock value.

Compound annual returns have been 14% over 10 years, 17% over 20. He's owned this for a long time and sees no reason to sell it. Yes, a slowdown in US construction effects part of their business, but there will be long-term growth in China. Growth rates will endure. Water remains a major issue in the world.

Heating and thermostats are a good space, but he prefers Carrier for their European acquisition.

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.