This paper investigates the hydrodynamic performances of an smoothed particle hydrodynamics (SPH) code incorporating an artificial heat conductivity term in which the adopted signal velocity is applicable when gravity is present. To this end, we analyze results from simulations produced using a suite of standard hydrodynamical test problems. In accordance with previous findings, we show that the performances of SPH in describing the development of Kelvin-Helmholtz instabilities depend strongly on both the consistency of the initial condition set-up and the leading error in the momentum equation due to incomplete kernel sampling. In contrast, the presence of artificial conductivity does not significantly affect the results. An error and stability analysis shows that the quartic B-spline kernel (M 5 ) possesses very good stability properties and so we propose its use with a large neighbor number, between ∼50 (2D) to ∼100 (3D), to improve convergence in simulation results without being affected by the so-called clumping instability. Moreover, the results of the Sod shock tube demonstrate that to obtain simulation profiles in accord with the analytic solution, for simulations employing kernels with a non-zero first derivative at the origin, it is necessary to use a much larger number of neighbors than in the case of the M 5 runs. Our SPH simulations of the blob test show that in order to achieve blob disruption it is necessary to include an artificial conductivity term. However, we find that in the regime of strong supersonic flows an appropriate limiting condition, which depends on the Prandtl number, must be imposed on the artificial conductivity SPH coefficients in order to avoid an unphysical amount of heat diffusion. Our results from hydrodynamic simulations that include self-gravity show profiles of hydrodynamic variables that are in much better agreement with those produced using mesh-based codes. In particular, the final levels of core entropies in cosmological simulations of galaxy clusters are consistent with those found using AMR codes. This demonstrates that the proposed diffusion scheme is capable of mimicking the process of entropy mixing that is produced during structure formation because of the diffusion caused by turbulence. Finally, the results of our Rayleigh-Taylor instability test demonstrate that in the regime of very subsonic flows the code still has several difficulties in the treatment of hydrodynamic instabilities. These problems are intrinsic to the way in which standard SPH gradients are calculated and not to the implementation of the artificial conductivity term. To overcome these difficulties, several numerical schemes have been proposed that, if coupled with the SPH implementation presented in this paper, could solve the issues that have recently been addressed in investigating SPH performances to model subsonic turbulence.