As I was scanning James Cullen’s site I came across a post that intrigued me.
James wrote an analysis of USG and for the back round, here is it. Now that being said, in an interview I gave wit him, I said that I though housing was the next big value find. I also said that currently the situation was “too opaque” and that there would most likely be some builders go under. Trying to figure out who is next to impossible as the variables (land owned, where it is, local housing markets, carried value of land on books etc) are so subjective, getting a true handle on a builder is just guesswork.
So, that being said, if we do think home building is the next value area, rather than try to pick a builder, why not pick the maker of a product they all need? It really does not matter who is left standing among the builders when all this is over. No matter who it is, they will be buying wall board from USG.
That makes USG a very interesting proposition. It also does not hurt that Warren Buffett’s Berkshire Hathaway (BRK.A) owns 17% of the stock.
James did a follow-up post after the recent earnings call and the outlook for 2008 is not real rosy. But, this is a management team that has never thrown out rosy scenarios to investors in an attempt to prop up a stocks price.
It would seem that I am not the only one who thinks this way as the stock has jumped from $31.05 to $38 (22%) and change since Jan. 7th.
What to do? Well, sit and wait for now. I can’t buy anything after a 2 week 20% plus run. Now, if the stock were to give 1/2 that back, I would then become interested. Should it plop more back on the table, I would be inclined to be a buyer.
Will it? I am inclined to say yes. Housing will be a drag for a while and eventually many recent buyers will give up and move on to something else. When they do, the price ought to fall.
Disclosure (“none” means no position):None
3 replies on “Looking at USG”
If you haven’t, I’d highly recommend looking at Mohawk Industries. Think USG but carpets. Berkowitz owns lots of it. Trading under 9x FCF.
i looked at them before but something stopped me..do not remember what
i will look again
I agree with you about how USG is great way to play the housing situation. I started buying shares last year and was excited when the shares toke a dive to the low 30’s.
I persist to explain to the wife about how it’s a good thing when stocks take a dive.