USG

Lets take a look at the some of Buffett's previous investments and ponder over them..perhaps some of his wisdom can enlighten us.

USG.In 2001, Berkshire Hathaway bought USG stock for about $15 a share .A few months later, much to dismay,USG filed for bankruptcy.One underlying reason for this was the huge asbestos ligation that it faced. USG "faced more than 250,000 claims",which battered the stock and drove it to an all time low of $2.80. The CEO felt that bankruptcy would be the only alternative left as it would protect the business from claimants while it worked on settling the asbestos ligation.Such a strategy would keep the company from being forceably liquidated by claimants while giving it time to work out an arrangment with the claimants.

Buffet was sure that the stock would bounce back and even loaned USG stock to short sellers at an interest,knowing that the fundamentals of the company were strong and it was just a matter of time.

After its bankruptucy in 2001, the housing boom in the US meant strong growth for the company in the coming years and helped boost the company's revenues.Now, the stock current trades abt $54 and Buffett's stake is worth at abt 700 million,which is roughly abt 5 times his intial investment.

Here a key lesson is learnt.Ignore the pessimism surrounding the company and dig into its fundamentals to uncover its true potential.

Written by Manpreet