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USG Corp: Another Buffett 'Failure to Sell' Mistake

Selling/buying options in size versus selling the stock puts you in exactly the same place. The folks that do options in size will use the stock to hedge so you are just running around in circles. Additionally, you can move the market in options prices just like you can move the stock price if enough size is done (and it will take far less size to move that market) and they will tend to move together as each can be substituted for the other through delta hedging for the most part.

You asked me how I would value USG and my answer is, "I don't know." Then again, I didn't write the article so I would not be expected to know... You wrote the article and your thesis is that because the stock was higher at some point he should have sold it.

Hmmmm. Does it follow logically that just because a stock is trading far from its high price that not selling it was a mistake given the information one had at the time? Of course not! 20/20 hindsight is a wonderful thing to have.

Regarding those that criticize Buffett's record - it is pretty funny. It's only one of the best of all time. He is not perfect for sure but come on and give him his due. I wonder what it takes to get a compliment out of you folks...

Battle of the Building Material Makers: Owens Corning vs. USG Corp.

Regarding PRS I think you are totally missing the point. Market prices on PRS's liabilities reflect somewhat of a market view of the fair price of the risk that they are carrying. When prices fall it means that either expected default rates are increasing or the price of such downside risk has become more expensive. Either way, the value of those contracts is now lower and could be replaced at more favorable prices by competitors.

Additionally, I would not want to rely on the company to give me an unbiased and accurate view of the likelihood of their current contracts costing them a lot of money. All of their incentives point in the other direction. I would be a bit suspect if there is a large gap between what the market is implying and what their management is telling investors.

Battle of the Building Material Makers: Owens Corning vs. USG Corp.

Paul, the appeal would be grounded in the likely cash flows available to USG in years to come. This may come as a surprise to you, but the majority of a company's value is usually not totally captured in the next 2 years of earnings.

USG Corp: Another Buffett 'Failure to Sell' Mistake

Paul, you make no real valuation argument regarding USG shares. Another poster has written that there were A LOT of unusual things going on with the company over the period in which you have taken your simple statistics. To put it bluntly, using such statistics over such a period is quite nutty and really not at all useful nor persuasive.

How about we assume Warren is somewhat rational (I don't think this is too far a stretch) and work backwards from there. At what valuation point would he have sold USG when it got as high as it did? If he thought it was worth $80 per share (meaning it would continue to return pretty good returns to investors at that price going forward), for example, would he have sold it at $120? I don't think he would. Given the taxes he would have had to pay and the uncertainty of being able to reenter the stock at an equivalent after-tax price, there is a strong argument to be made that he would simply hold on. If he originally bought at $50 he would have to pay tax on $70 of appreciation and that might be almost $30 per share right there.

Perhaps if he thought the company was worth $60 he may have sold, but he would not have invested at the prices that he did originally if he really thought it only worth that much as that would not give him all that much margin of safety.

I find your analysis to be quite shallow and unconvincing. It seems to me that your basic argument is that since the price now is well below the stock's recent high price that not selling it was stupid. But, of course, value investors believe that stocks often trade for significantly less than their fair value - so this movement in price would not be a shock to anyone who thinks this way.

If USG moves back up to $150 in 3 years, who would be right then?