If Buffett Really IS Buying More Housing Stocks, What About USG Corp. (BRK/A, USG, HOV, XHB)?

There have been market rumors today that Warren Buffett’s Berkshire Hathaway could be buying a stake in Hovnanian Enterprises Inc. (NYSE:HOV).  The truth is that anything is possible, particularly since Buffett likes businesses that you never have to sell.  It isn’t even worth trying to debate the truth or fiction of this because you can see it in the stock with Hovnanian (NYSE:HOV) up 9% as short sellers don’t want to be caught in this market and don’t want to be caught on the wrong side of a Buffett bet.  Hovnanian has much exposure to the volatile California and sensitive Florida markets, and this makes the thought of this questionable.  Once again though, why bother questioning it as the sector is up on the hopes and on short covering.

This has homebuilders higher, and even has the SPDR Homebuilders ETF (AMEX:XHB) up 2.5% at $30.80.  based on an initial look at the chart on the "XHB" as a group, this doesn’t really change anything.  But a chart won’t be able to fight a buyout or stake taken by Buffett.  that sector is in the tubes and the only good news in the group is that "less bad news than before" will come at some point.  It always does.

Buffett’s Berkshire Hathaway (NYSE:BRK.A) already has many housing related plays as wholly owned: Benjamin Moore & Co., Clayton Homes, Johns Manville, Jordan’s Furniture, Nebraska Furniture Mart, RC Willey Home Furnishings, Shaw Industries, Star Furniture, Acme Brick Company, and more.  So anything is possible in the sector.  But what has to be asked is "WHAT ABOUT USG CORP (NYSE:USG)?"  USG is trading under that $50.00 threshold and supplies sheetrock and related products to many of the homebuilders.  It is a long-standing "Buffett rumor target" since he owns such a big stake and would be quite easy for Berkshire Hathaway to integrate.

Jon C. Ogg
July 13, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.