Wayne, I hope you don't mind if I comment. I held USG for a year or so, and sold shortly after the annual meeting. While I'm aware that Buffet sees value here, there are certainly things to beware of
1) Asbestos liability. A large, and unknown liability. To date, most settlements were paid by USG's insurance, which is now running out. USG has consistently set aside money for this, but who knows if it is enough. We've already seen a couple companies declare BK due to asbestos liability.
2) Industry Fundamentals - for much of the last 2 years, there was a shortage of wallboard, and prices rose. Significant capacity was therefore added (much of it by USG) and that (plus a slowdown in building) has led to falling prices.
3) Management that doesn't give a rat's a** about the shareholders. A large shareholder led a proxy fight against management. If I recall correctly one of his beefs was that mgmt was spending so much on capex rather than fund more aggressive buy backs. He essentially predicted the current situation. Management did all they could do to fight him, including a short-lived stock buy back. Once the shareholder lost, I knew the buy back would end. That, combined with crumbling building fundamentals convinced me to sell (thank God).
That said, there is still a lot to like, especially at these prices. For one thing, they own the premier brand name in the business. Sheetrock is the Kleenex of wallboard. When last I looked, I think USG had about 1/3 of the U.S. market. Also, wallboard is fairly immune to overseas competition, as it is somewhat difficult (easy to break, can't get it wet, etc) and costly to ship.
Hope this helps. |
