Buffett Continues USG Buying Binge
Monday August 28, 10:36 am ET
By the InsiderScore.com Research Staff
The "Oracle of Omaha" continues to up his bet on wallboard manufacturer USG Corp. (NYSE: USG - News).
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National Indemnity Corp., a wholly owned subsidiary of OBH Inc., itself a wholly owned subsidiary of Berkshire Hathaway (NYSE: BRK-A - News), has increased its holdings in USG to 16,700,992 shares, or an 18.6% stake. The vehicle of Warren Buffett bought 567,218 shares at $45.92 on August 21st; 390,200 shares at $45.97 on August 22nd; 734,700 shares at $45.90 on August 23rd; and 7,000 shares at $46.03 on August 24th.
The purchases by Buffett's holding companies each scored 1.3 out of 4.0 by InsiderScore.com's proprietary scoring algorithm.
Buffett backstopped an early August rights offering for USG, which raised the company $1.8 billion in gross proceeds. Buffett owned a 14.55% stake ahead of the rights offering, and afterwards he owned a 15% stake. He's been buying on the open market since.
"We appreciate Warren Buffett's support and like having Berkshire Hathaway as a shareholder," USG spokesman Robert Williams told Reuters earlier this week.
USG emerged from bankruptcy in June, depositing $900 million in an asbestos litigation trust in the process. The company had filed for bankruptcy five years ago due to asbestos litigation issues, and it's currently hoping that lawmakers pass a bill creating a federal asbestos trust fund. The bill was scuttled last year, but has been revised.
Late last month, USG announced second-quarter results, reporting earnings of $176 million, or $3.30 per share, up from $110 million, or $1.96 per share, a year ago. Revenue rose 22% to $1.57B.
"USG's businesses continued to perform exceptionally well in the second quarter," said USG Chairman and CEO William Foote. "Once again, sales were the highest ever recorded for a quarter, driven by record product shipments achieved by L&W Supply and United States Gypsum Company. All of our businesses achieved profitable growth, reflecting the success of our strategies, including the ongoing expansion of our distribution business and additions to our industry-leading wallboard manufacturing facilities."
Foote continued, "With our emergence from bankruptcy on June 20th, I am pleased to report that USG has delivered on its commitment to repay our creditors in full, compensate those who have been injured by asbestos, preserve equity value, and emerge operationally stronger. I am particularly proud of USG's excellent operational performance over the last several years, which enabled us to emerge from Chapter 11 as a stronger and more profitable company. Our businesses are well-positioned to continue growing and provide superior service to customers."
Shares of USG rose as high as $121.70 in April, creating a painful situation for those short the stock at the time, including Carl Icahn. The billionaire corporate raider, according to published reports, took out a short position on USG in late 2004, when the stock was trading in the mid-$30s. Bloomberg News reported in early May that Icahn had a $66 million paper loss sitting on his books from a short position, and the speculation was that it was USG.
Icahn would not confirm or deny that USG was the blight in his portfolio, but he was critical of the stock in a May interview.
"People make a mistake in evaluating what they are paying for USG today because they do not take into account the $4 billion that will shortly have to be paid for the asbestos settlement," Icahn told TheStreet.com.
"During my career, I've entered a number of short sales and [have] generally been quite successful, but it takes a bit of time," Icahn said. "In Conseco (NYSE: CNO - News), we were losing over $30 million before finally realizing a $130 million profit when the company went to zero."
$47.23 (10/03/06)
