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 Reports and Commentary from the Investment World

Reports and commentaries are posted here on a regular basis.


USG Corp



USG Corporation is a Fortune 500 manufacturer and distributor of high-performance building systems through its United States Gypsum Company, USG Interiors, Inc. and L&W Supply Corporation subsidiaries. The company was formed in 1901 and is headquartered in Chicago. USG serves the residential and construction markets, repair and remodel construction markets, and industrial processes. USG's wall, ceiling, flooring and roofing products provide leading-edge building solutions for customers, while L&W Supply center locations stock and deliver building materials nationwide.

Berkshire Hathaway, Warren Buffett's company has been buying USG for months.
Buffett, backstopped last year’s rights offering for USG, which raised the company $1.8 billion in gross proceeds. Buffett owned a 14.55% stake ahead of the rights offering, and afterwards he owned a 15% stake. He's been buying on the open market since. He now owns more than 18% of the company.
Buffett doesn't buy things because they are flavour of the month. He buys things that he believes will have 'incredible value' over the longer term.  Warren Buffett is buying USG, because he can wait and ride through the company’s short- term problems.   It is a rare occasion when Buffet buys so much of a particular company, so obviously he knows something that we don't.

USG  emerged from bankruptcy on June 20th, 2006. It deposited $900 million in an asbestos litigation trust in the process. The company had filed for bankruptcy five years ago due to asbestos litigation issues. Since then, USG has delivered on its commitment to repay its creditors in full, compensate those who had been injured by asbestos, preserved equity value, and emerged operationally stronger. USG has demonstrated  excellent operational performance over the last several years, which enabled it to emerge from Chapter 11 as a stronger and more profitable company.  USG’s businesses are well-positioned to continue growing and provide superior service to customers.
Last year revenue grew 22%. Last month, the company reported it swung to a first-quarter profit but said revenue slid due to the housing construction slowdown. However, this should only be a temporary set back as it is  expanding its distribution business and making additions to its industry-leading wallboard manufacturing facilities.
USG has a market cap in excess of US$ 5 Billion. It is a well managed Fortune 500 company.  It has a P/E of 11 and is very cheap, at current prices. Last June, you would have had to pay US$96 for the stock. Today you can pick it up for around US$52.

Buy USG Corporation (NYSE:USG) up to US$58



Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.