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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: James Clarke who wrote (6322)	3/16/1999 3:21:00 PM
From: Bob Rudd	Respond to of 78596

USG: Asbestos- They haven't put it in anything since 1977. They still get claims and have some offsetting insurance..some insurers are gone. The costs appear manageable. From recent 10K: "However, it is management's opinion, taking into account all of the above information and uncertainties, including currently available information concerning U.S. Gypsum's liabilities, reserves and probable insurance coverage, that the asbestos litigation will not have a material adverse effect on the liquidity or financial position of the Corporation." There was a couple of pages of won-some, lost-some, accrual discussion that lead to this. Net IMO No biggie. Bankruptcy: It's history...They leveraged up to avoid hostile LBO and construction market went south. Existing equity went to debt holders. Look at the balance sheet: Current Ratio (mrq) 1.86 Long-Term Debt/Equity (mrq) 1.08 Total Cash (mrq) $152.0M. The positive effect of the bankruptcy was it forced them to sell non-core businesses and get lean throughout. This with economies of scale and superior process technologies makes them the low cost producer with greater access to distrubution channels. They just declared dividend and they're buying back shares. Those two words, Asbestos & Bankruptcy, may help account for the lack of interest at such a reasonable multiple.

To: James Clarke who wrote (6322)	6/3/2010 7:57:21 AM
From: Walter Bagehot	Read Replies (1) \| Respond to of 78596

USG Looking at Buffett's holdings, he holds USG in Berkshire Hathaway as well: I am at a loss though to see what value he sees in the business. Does anyone else have any opinion on it. Sure, it looks like a crummy business, but I don't see any redeeming feature that would attract a value investor - only redeeming feature is the nil goodwill on balance sheet - Heavily lossmaking - Cashflow is poor - Debt-laden ($2bn) - Working capital is highly volatile My only guess is that he invested based upon the asbestos claims being less than feared, but has found the building products world more competitive and with higher cost inputs than previously expected (gypsum supplies from mining running low?) I'm fishing around Buffett's holdings to try to find certain characteristics that could give me an edge in stock selection, but I'm slightly at a loss on this one. Thoughts?