USG Corp (USG)

2centnickel (< 20) Submitted: 7/23/07 8:05 PM : Start Price: $46.99 USG Score: -38.90

Who Owns USG? -http://deepvalueplays.blogspot.com/

There are 99 million USG shares outstanding and 70% of those are float. Buffett is a beneficial owner, so his 20% ownership of USG's total outstanding shares is part of the insider ownership, not the float.

The float is primarily owned by value investing firms. Last quarter, of the top fifteen float shareholders, one(Fidelity)sold 3% of their position, nine increased their stake and five initiated their positions. Their combined shares account for about seventy percent of the float.(Included in this number is a large German company not listed on MSN, Knauf International, who owns 9.3 million shares as of 3/07. They also increased their position last quarter.)

http://moneycentral.msn.com/ownership?Symbol=USG

At least eight of those firms are strictly deep value players and the rest are obviously basing their bets on a value thesis. This leaves about 20 million shares or 20% of the total shares outstanding as a kind of free float. By free float, I mean the body of shares owned by smaller investors who may or may not be value oriented, though I assume all long-sided short term speculation has been flushed out by now. Most if not all speculators are now likely weighing in against the long position as evidenced in the current(7/17/07)short interest of 15%.

My point is that almost three quarters(quite possibly more)of USG's entire market capital is owned by deep value players, and they're still buying. Furthermore, Buffett owns a much larger percent of the company than he did in 2005-06 when the stock price went through the roof. He did not sell one share then and you can bet heavy he won't sell next time either. When the good news eventually comes, demand for shares is going to escalate very fast due to the small free float and a short squeeze(if they're still around.)

Despite the ominous subprime clouds, recent bad housing news has failed to hold USG's price below Buffett's last and highest purchase price of $46.03. The value players are controlling this bottom and seem to have no qualms about increasing their positions.

In his backstop agreement with USG, he has agreed to not by more than 40% of the company for the next seven years unless he buys the whole thing with USG's board approval.(http://www.secinfo.com/d14D5a.v4R9n.htm)

If you plan on buying cheaper than Buffet, good luck. Sure, if you buy now you're going to have to be patient, but you will be making a deep discount purchase into a hundred year old company with a very bright long term future. Graham and Fisher have advocated buying not at the right time, but at the right price. When I find my crystal ball I'll start timing the market. Until then I'm stuck with Buffett.

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