Although I have made very good money in real estate this year, especially in rentals and apartment renovations that have come to banks via foreclosures, I understand the reluctance of investors to get back on board with securities that represent companies belonging to the real estate-related sector. However, one commodity that all aspects of construction from foreclosures to rehabilitation to renovations to additions to modern updating to new construction must have is wall board (and related construction materials).
USG (NYSE:USG), a Chicago-based manufacturer and distributor of building materials, produces a range of products for use in residential, non-residential and repair and remodel construction, as well as products used in industrial processes. The company is divided into several entities:
USG Mexico has been a leading supplier of wallboard and related components in Mexico since 1969. This division also exports products to Central America and the United States.
USG Interiors was formed by USG in 1986 to serve the multi-billion dollar commercial interiors market. It is a leading manufacturer of acoustical ceiling panels and ceiling suspension systems. It holds the #2 position in market share for these products in the U.S. USG Interiors continually introduces innovative products such as the recent award-winning "compasso" curved suspension ceiling, metal ceiling panels and unique three dimensional panels.
United States Gypsum Company was incorporated in 1901, formed by an alliance of thirty firms that produced gypsum rock and plaster. It is North America's largest manufacturer and marketer of gypsum-based products. United States Gypsum Company created the world's first commercially viable wallboard called "Sheetrock" in 1917. It receives gypsum rock from 14 mines and quarries in the U.S., Canada and Mexico. This subsidiary also operates a fleet of cargo ships based in Bermuda, seven paper mills that produce high quality wallboard paper from 100 per cent recycled paper and the largest plant that produces fiber board in, of all places, Gypsum, Ohio.
L&W Supply Corporation was formed in 1971 to provide efficient distribution and a service network for independent builders and contractors. L&W is the nation's largest distributor of specialty gypsum wallboard, operating a fleet of almost 1,500 light and heavy-duty trucks to deliver product around the country. This entity specializes in transporting and stocking wallboard,joint treatment, acoustical ceiling panels,ceiling suspension systems, drywall steel, insulation, roofing products and other building materials.
CGC is the leading gypsum wallboard producer in eastern Canada, and is the country's leading producer of ceiling grids. CGC markets, delivers and stocks materials in a similar fashion to L&W.
And, USG Corporation itself was established in 1985 as the holding company for subsidiaries and for research and development - primarily in Libertyville, Illinois outside Chicago.
Trading at $27.38/share, USG has seen a 52-week range of $23.12-40.54. The company beat Wall Street expectations recently, but it still lost money. With a market cap of $2.7b and trading actively at almost 1 million shares per day, USG, rated a SELL by many analysts, represents a very interesting speculation at this time.
USG caters to every facet of the building industry by providing essential products that are used throughout all types and standards of construction. Although new homes are not being built in great numbers, one can be sure that rehabbers, renovators and other users of USG's core products are not going away. If commodity prices continue to drift down in price, I believe that USG could be back in the $40/share range sooner than the analyst's expect.
USG is an excellent way to play every angle of property enhancements. And, it's an excellent speculative buy vs. other building supply and real estate sector companies at this time.