Berkshire Hathaway and Warren Buffett did not change their position at all in USG Corporation, and their 17 million shares remained unchanged throughout the second quarter. They had an opportunity to take profits because the stock rose 11% during the three-month period while the S&P dropped. USG is actually up 92% year to date as the building materials manufacturer and distributor has benefited quite a bit from the investor confidence in the soon to be housing and construction recovery.
This company primarily makes gypsum products such as wallboard. Around half of the revenues of this company are from new construction projects, and then the rest of the revenue comes from repair and remodeling activities being done.
There are many other investors who are also into the stock. It is not sure whether or not they are following the lead of Warren Buffett, or because they truly want the exposure to the construction and housing market that USG provides. Warren Buffett has actually owned the stock for quite some time now, but Prem Watsa, who is the Warren Buffett of Canada, recently started building a position in this company back in the spring of 2011.
His company Fairfax Financial Holdings reported in June of 2011 that they took out a position of 7 million shares. They still hold this exact same position at the end of 2012 during the second quarter. Ken Griffin, CEO of Citadel Investment Group, built his stake by 66% during the second quarter and raised his position up to 4.7 million shares. Aletheia Research and Management also took out a position which they initiated at 1.4 million shares.
The 10 Q report from USG showed that they had an 8% increase in revenue when you compare it to the second quarter of 2011. This growth is actually weaker than the growth seen in the first quarter by this company, and it also shows us that the first-half numbers are roughly at 10% higher. There are people worrying that some of the results might be due to the fair weather conditions that we had during the first half of this year. That could mean that a lot of construction activity took place well ahead of schedule. If that is the case, then the great results that they are seeing may not continue to improve in the future quarters that are coming up. They may not have a large advance and this will make future projections suffer a bit.
It’s also important to note that USG hasn’t actually turned a profit. The first half of 2012 met with $.79 worth of net losses per share. But this is a lot better than the $1.70 per share losses that they suffered a year ago. The investment world is starting to recognize that a housing recovery is on the way, but as you can see we already told you that the stock has moved up quite a bit this year, so it probably has captured all of the gains that it is going to see.
Wall Street analysts actually believe that the company will turn a profit during 2013. The company is expected to have made $.12 per share in earnings during that year. USG carries a beta of three and is highly sensitive to the overall market conditions.