Sell Half of USG: It Might Have Peaked

For those of you who own USG Corporation and bought it when I advised must be loving the gains especially after yesterdays jump. The stock surged 28% yesterday and has now gone up 65% in a little under two months. USG is now trading at $19.64 which is above my 12-month target of  $19 per share. I still think the stock has room to grow based on the increased 2010 expectations. Also, USG has seen an increase in home improvements in 2009 with more to come in 2010 raising the earnings expectations of the company.  Adding to this I like USG’s aggressive cost cuts and as a result I expect an upturn in sales leading to profitability in 2010. My original buy recommendation for USG where based upon attractive valuations, long-term prospectives within the sector, little debt, and due to USG’s below market P/E they have a very attractive upside potential. Now however with the recent surge I am pulling out half of my position and taking the profits. The valuations are no longer as favorable and some are wondering whether or not the stock has peaked. Adding to this increased risks on whether or not USG will have enough capital to supply projects adds concerns to the stock. Overall, sell half and ride out the other half.