Olde Man Buffett Likes His Wallboard

One of the things that surprised me this morning was Berkshire Hathaway announcing it upped its holdings in wallboard maker, USG, to 30.5% of the outstanding shares. Well, it’s not exactly that straight-forward. Here is the press release.

Berkshire Hathaway (BRK.B) discloses 30.5% active stake in amended 13D filing; BH Nebraska, BH Assurance and General Re Life acquired the Conversion Shares for investment purposes (28.38 )

• On November 15, 2013, USG issued a notice of redemption to redeem on December 16, 2013, $325 million in aggregate principal amount of the Notes. The Notes called for redemption would be subject to redemption at the stated redemption price equal to 105% of the aggregate principal amount of such Notes, plus accrued and unpaid interest to (but not including) the redemption date, unless the holders of the Notes that were called for redemption converted such Notes prior to the redemption date. The Called Notes were convertible into 87.7193 shares of Common Stock per $1,000 principal amount of Notes (based on the conversion price of $11.40 per share). If the Berkshire Entities declined to convert the Called Notes and allowed such Notes to be redeemed, the Berkshire Entities would have received an aggregate redemption payment in an amount less than the value of the Common Stock received on conversion, based on the market price of the Common Stock at the time of the conversion by the Berkshire Entities. BH Nebraska, BH Assurance and General Re Life elected to convert the Called Notes held by them, in the aggregate principal amount of $243,830,000, into the Conversion Shares totaling 21,388,597 shares of Common Stock in the aggregate.
• Accordingly, on December 9, 2013, (i) BH Nebraska acquired 11,403,509 shares of Common Stock upon conversion of the Called Notes held by it in the principal amount of $130,000,000, (ii) BH Assurance acquired 6,414,474 shares of Common Stock upon conversion of the Called Notes held by it in the principal amount of $73,125,000, and (iii) General Re Life acquired 3,570,614 shares of Common Stock upon conversion of the Called Notes held by it in the principal amount of $40,705,000.

The olde man converted some debt and now owns a monster position in USG. Given his position and enormous cash position, he might go all the way with this one and acquire the company.

I find it interesting, since housing related names took the year off in 2013, meandering about the sewer pipes, hanging around unsavory types. Perhaps this is the breakout year for residential construction and material stocks. Perhaps, we might get to see some inflation, which will show up in basic materials, even gold.

If that’s the case, you will want to own cement, iron and steel, lumber, gold/silver and of course homebuilders–maybe a little copper too.

After all, the whole point of this QE business is to reflate the economy. Up until now, inflation has been nonexistent, with exception for stock prices.

Look for that theme to play out in early 2014, with a an eye on FCX, VALE, X, CLF, AG, GG, BZH, RYL, LL, USG, JOY and CX.