Tuesday, July 27, 2010

What's the Significance of Berkshire Hathaway (BRK) and Warren Buffett's Investment in USG Corp (USG)?

Buffett has a big stake in USG Corp (USG), but I have some contrarian theories about Buffett:

  • There is no information content in a Buffett holding as opposed to a purchase, because he basically won't sell no matter how bad things get. Examples: Moody's (discredited by their mortgage security ratings), Washington Post and Gannett (dying industry), USG Corp (down hugely since most of his purchases, why hold through a housing crash?), General Electric (turned itself into a bank making risky commercial loans)
  • These deficits could stem from Buffett's mental models of America (and Goldman Sachs, and the newspaper industry) not recognizing the changes that have occurred since the 1950s.
  • Has there ever been a case where Buffett recognized a problem in an industry and sold his holdings or went short?

I think USG breaks Buffett's own rules. Where is the "moat"? - the products are not really differentiated.


GlennC said...

He made a brilliant decision to sell Fannie and Freddie common stock, and happened to make a killing on the position.

CP said...

It only took three years for someone to think of an example. Thanks!