Att. wrm 366-- Need your opinion and thoughts about recent Short Interest increases.
As you must be aware, Shorts have been increased to 16.8 million from 11.4 million on 4/30/13. Do you think that this is just a hedge move by longs, in anticipation of changes in the outstanding stock of USG, because of the need to protect the NOL's. Also if BRK announces it's conversion of bonds to stock, would not this be looked favorably by the market, and bring about a rise in USG's stock price? Looking forward to you reply.
The increase in a stocks short position is almost always due to institutional adjustments. At the end of the of the 3/31/2013 13f reporting period there were 295 filers, Closing price on 03/31/2013: $26.44
Six Filers had this stock in their top 10 and 219 13F Filers holding 79M shares of this stock.
The report period ending on 6/30/2013 there were 128 filers and 26 of those sold out resulting in 102 filers holding shares but 14 to 16 of those have not filed. How to value this company is the question as the conversion of bonds does nothing to change the equation as some debt is converted into shares for almost a wash. Earnings will drop as they will be divided over a greater share count so the PPS will recede. Equity for a company that does $3B in sales is nil and trades at 200 times Price /Book. The USA is going through a quiet revolution where the Federal government will take over health care with a single payer system (the Chinese for over 3 years are flabbergasted at the speed of the plunge into Marxism and the lack of resistance to it by the American people...their words not mine) destroying the health care insurance market except for the supplemental insurance market such as AARP is involved in. Taxes will increase to support the single payer system. The housing market will not recover quickly as every increase in taxes always shows up as increases in the goods and services everyone uses and depletes the wealth of the middleclass and the poor and this pushes people into rental properties. Industrialized Countries such as Germany (great health care there...no?) which we are now modeling the USA on have the ratio of owner-occupied units to total residential units in the 50% range while the USA currently holds at the 65% range. I truly do not see how to value this company over $15...but I am not the Institutions nor the MM's who hold the puppet strings.
At the present selling prices, the conversion of debt is not a wash. $1000.00 of debt, converts into 87.7 shares of USG stock, which at todays prices, would be equal to $2236.00, this is no wash. Next, the value of USG, is what someone is willing to pay for it. In the past, BRK doubled up on it's position, and payed $40.00 per share, at the time of the rights offering. What happens in the future, we will have to see.