Comments on: USG is a Fat Pitch

By: jeff

jeff — Fri, 05 Oct 2007 16:29:45 +0000

USG is past the asbestos deal too so they’re stock’s now in the clear to start gaining value.

By: Bill

Bill — Sat, 03 Mar 2007 18:34:35 +0000

As a cyclical business, USG has generated peak earnings last year. It took 6 years to eclipsed 1999 operating earnings ( asbestos excluded ). Thus, cycle seems to be very long. I find difficult to modeled the right assumptions about margin pressure & drop in volumes (Threats) versus low cost advantage (Strenght) and market share gain (Opportunity) in this slowing period.

I would be very pleased to know your views on these concerns.

Thank you

By: Warren Buffett Buys More USG and More - Fat Pitch Financials

Warren Buffett Buys More USG and More - Fat Pitch Financials — Fri, 16 Feb 2007 06:07:02 +0000

[...] As you might remember, I added USG Corp. to the Fat Pitch Financials Port last August. It’s nice to see that Warren Buffett continues to find this stock worthy of buying. I’m already up almost 17% since my purchase of USG. As I’ve witnessed before, it is often very profitable to invest along side Warren Buffett. [...]

By: Fat Pitch Financials Portfolio Performance Update - Fat Pitch Financials

Fat Pitch Financials Portfolio Performance Update - Fat Pitch Financials — Wed, 06 Dec 2006 11:34:11 +0000

[...] USG CORP [...]

By: Ian Gardiner

Ian Gardiner — Wed, 30 Aug 2006 20:25:30 +0000

Interesting to read that you use DCF - congrats on the new baby too!

By: Buffett Continues to Buy USG Corp - Fat Pitch Financials

Buffett Continues to Buy USG Corp - Fat Pitch Financials — Fri, 25 Aug 2006 10:36:18 +0000

[...] Obviously at this point Warren Buffett thinks USG Corp is a fat pitch at prices below $46. I wonder how long he will continue purchasing USG when it drops below $46. For now, I’m pretty excited to have Warren Buffett backing my purchase of USG stock. [...]

By: George

George — Fri, 25 Aug 2006 03:58:17 +0000

Thanks for clearing that up Rogermunibond. I hadn’t gotten a chance yet to look into Solutia. The newly issued stock might be interesting but it looks like SOLUQ is not worth any effort.

By: Rogermunibond

Rogermunibond — Fri, 25 Aug 2006 02:57:25 +0000

SOLUQ common is canceled and new stock in the reorganized company is issued to unsecured creditors and Monsanto. From the latest 10q…

“The Plan does not provide for distributions to the holders of Solutia’s existing equity. Under the Plan, Solutia’s existing shares of common stock, as well as options and warrants to purchase its common stock, would be cancelled and holders of Solutia’s common stock, including options and warrants to purchase Solutia’s common stock, would receive no consideration for that stock or those options and warrants.”

By: Keith

Keith — Tue, 22 Aug 2006 19:18:51 +0000

I thought the same thing about USG but thought their share price should be about $55-65 per share. But if you like USG, what do you think about Solutia (SOLUQ.OB) This is a company that is emerging from bankruptcy through a rights offering from their parent company, Monsanto. The company’s re-org plan says that after the offering, unsecured creditors could control 22.7% of the stock, Monsanto will own up to 49% and the new company will have a market value of between $2-2.3 billion. Current stock holders will therefore control the remaining 27.3% of the company’s book value which would be $546 million. The company has a current market cap of $47.1 million. That’s a company selling at less than 10% of its book value after the offering. Also, the company sales and gross profits have climbed each of the last 4 quarters, they have a leadership position in their markets, are pooring money into R&D and expanding plants and the money from the rights offerings is to fund environmental cleanup that drove them into bankruptcy. This seems like a no-brainer which of coarse scares me to think I am missing something?

By: » Carnival of Investing #36 on Blueprint for Financial Prosperity

» Carnival of Investing #36 on Blueprint for Financial Prosperity — Mon, 21 Aug 2006 17:03:19 +0000

[...] George at Fat Pitch Financials presents USG is a Fat Pitch. [...]

By: George

George — Fri, 18 Aug 2006 04:39:45 +0000

My quick and dirty discounted cash flow model used 58 million shares. Yikes, I should have used 89.8 million shares. Thanks for asking the question. Thankfully, it still looks like these shares are trading at a discount even when factoring in the rights offering.

By: Investorial

Investorial — Fri, 18 Aug 2006 03:21:33 +0000

USG was one of my first stocks that I purchased when I got into investing… still kicking myself for not holding onto it. At least it was a 5-bagger, instead of the 20-bagger it could have been for me.

http://investorial.com/value-i.....-got-away/

I’ve recently started to make own assessment of its fundamentals again, that’s how I found this article. Thanks for sharing your views on the valuation. Question: Did your discounted cash flow model take into account the dilutive effect?

By: Bruce

Bruce — Wed, 16 Aug 2006 17:49:44 +0000

Though my estimate of FV isn’t very near the $80 level, USG looks like it could offer some interesting possibilities.

One alternative is that the company gets some asbestos legislative relief (2006 FAIR.) In this case I’m assuming something around $480 mm cash earings with a 12 multiple or around $64 a share as fair. Plus I would guess that since USG would save on kicking in more $ for the asbestos payout, some special dividend is a possibility.

My other thought is that if there is no legislative relief, I’ll assume $360 mm cash earnings with a 12 multiple or a fair $48 a share with no special dividend.

Could this be a “heads - I win, tails - I don’t lose” opportunity?

By: Max

Max — Wed, 16 Aug 2006 16:36:03 +0000

The recent decline (from about $90 to today’s $47) was not just from the dilution of shares. If USG was priced @ $80 per share before the rights offering, it should trade at ((80+40)/2) = $60 per share. Currently, it is over 20% below that price. This could be from institutional selling before the offering (because they didn’t want to cough up the $40/share and they also didn’t want to be diluted) or just negativity surrounding USG. As time has gone on, cycles in the industry have lasted longer and it’s hard to say USG is at “peak” earnings. Even if that is the case, USG is cheap. I believe George’s estimate of $85-100 is on the conservative side.

By: George

George — Wed, 16 Aug 2006 13:50:06 +0000

I understand that the Chaper 11 status is over. However, I still believe the stigma associated with it persists for some time after the event.

I agree with you that I should have detailed the rights offering. I simply ran out of time last night to detail everything I wanted to regarding my decision to invest in USG. That is why I mentioned at the end of my post that I will be following up with more details. I decided to post a short entry regarding USG yesterday in order to memorialize my purchase. I would like to have shared all my research at that time as well, but my family needed my attention.

By: michael

michael — Wed, 16 Aug 2006 13:24:24 +0000

Wow!!!! It is hard to believe that you could be so uninformed regarging USG. The chapter 11 status became a non event for the stock. In fact, since filing for ch.11 in 2001 the stock has gone from about 4 dollars per share to about 120 per share all while in bankruptcy. The recent dramatic decline in the stock is a result of the rights offering which gave shareholders the right to buy an additional share at $40 per share for every share they own. Obviously this had a dilutive effect on the stock. It is remarkable that anyone would put out research on USG without mentioning the most important events…………..