Exacerbating the stock’s weakness was the company’s announcement in early March that it would issue stock to pay for its acquisition of California Wholesale Material Supply, Inc. [CALPLY], a building materials distribution company.
With this acquisition, USG’s subsidiary, L&W Supply, which operates specialty distribution centers throughout the United States that sell to professional contractors – the only building materials sales and distribution business of its kind that is national in scope – will increase its distribution centers from approximately 220 to 250. In particular, the acquisition will greatly expand USG’s wallboard presence in the important Western states.
We like this acquisition and our view on USG's prospects and competitive position has not changed – plus it’s always a bonus to know that Warren Buffett owns 19% of the company and has bought aggressively in the past at today’s levels.
As we have always said, however, the stock’s near-term performance will almost certainly be volatile.
Full disclosure: Long USG.