USG Corp (USG)

TMFBBQPorkMogul (28.90) Submitted: 11/13/06 1:45 AM

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Although they are definitely in a cyclical industry, their end customers are diversified -- 40% of biz is non-residential, 30% is remodeling, so a decline in housing won't destroy them. Throughout their 100 years in business, they have shown a profit every single year, so they are well equipped to handle the ups & downs.

Consider also that the number of competitors in the wallboard industry has declined from 18 to 8, there are tremendous barriers to entry, and they are vertically integrated (including a 24 year proven supply of gypsum). More importantly, while in bankruptcy they used their cash to build state of the art manufacturing facilities that will drive efficiencies and lower costs for years into the future.

They remind me of Nabors Industries, which emerged from bankruptcy years ago with a clean, well financed balance sheet, and then bought equipment on the cheap when their competitors were suffering during the next cyclical downturn. There are very good reasons why Buffett bought 19% of the company -- he knows exactly what is going on.

BBQ
real money long in USG

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