A lot people know the names of the biggest companies Warren Buffett has stakes in through Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B). But it turns out one of the smaller positions -- if you can consider a $1.3 billion investment small -- is one company, and CEO, he thinks are poised for big returns.

The big investment in the little company
USG (NYSE:USG) or United States Gypsum Corporation isn't a household name like Wells Fargo, American Express, Coca-Cola, or IBM (NYSE:IBM) -- the companies Buffett affectionately calls his "big four" -- but its products sure are.

USG is one of the largest manufacturers of drywall and other various construction materials in the country, and holds either the first or second market position in all of the core businesses in which it operates.

A simple glimpse into where its products may find themselves in your home reveals while you may not have heard of it, you've definitely seen it:

Source: Company First Quarter Update

At last count, Berkshire Hathaway had a large position in USG, and a little back of the envelope math suggests the 43.4 million shares Buffett holds are worth $1.3 billion.  

Although this represents just 10% of the $13 billion position Berkshire Hathaway has in IBM, it's worth noting on a relative basis, Buffett's ownership stake of USG is five times greater than that of IBM, as Berkshire Hathaway owns 30% of USG versus 6% of IBM.

And it's also worth noting this isn't just an example of a position Buffett has held for decades that has grown in value. It was just a few months ago when we learned Berkshire Hathaway had more than doubled its stake in the manufacturer thanks to $300 million in debt Berkshire Hathaway acquired in 2008 being converted into stock. 

The big leader
Recently Institutional Investor magazine provided a fascinating interview of James Metcalf, the CEO of USG. It spanned a variety of topics -- Metcalf noted he couldn't sleep because he "was scared to death" the first time he met Buffett -- but notes while he still can't sleep before he sees Buffett, it's now because of excitement, not fear.

And after hearing his strategy for USG, one has to think Buffett is full of excitement too.

Metcalf began by noting while the business suffered during the Great Recession, it forced his company to sit down and think:

What do we need to do to differentiate ourselves? What is core?

As a result, the company identified its operations in North America as a "cash cow" and spun off its operations in Europe because the broader economic trends that would factor into the business were unattractive. It then took the resources it used in Europe and in turn "reinvested in the Middle East, Asia and Australia."

Warren Buffett at Berkshire Hathaway Annual Meeting, or "Woodstock for Capitalists."

USG went on to form a joint venture with Boral -- an Australia-based construction materials firm -- which gave it a 40% market share across 12 countries. And Metcalf went on to highlight the innovation USG offered in the materials space as it cut the weight of its product by a third, yet the strength remained the same.

This is to say nothing of the aggressive efforts it has done to make sure it is less susceptible to risks if the housing market experienced another downturn, its push to operate more efficiently by cutting costs, and countless other things.

Yet perhaps the most telling, Buffett-esque quote from Metcalf was when he said:

We run a network, so we're always delivering at the lowest manufacturing and delivery cost.

Not a year goes by when Buffett doesn't pile praise on the head of GEICO, Tony Nicely, for his ability to ensure the company is run efficiently, profitably, and innovatively as it provides the lowest cost to its customers. After all, in 2010 Buffett said:

GEICO became a different company under Tony, finding a path to consistent growth while simultaneously maintaining underwriting discipline and keeping its costs low.

Although the companies are very different, the key to success at USG has striking similarities to that of GEICO. After all, they both offer an essential product at a low cost with a focus to operate efficiently.

And knowing Buffett once said "it's hard to overemphasize the importance of who is CEO of a company," it is easy to see why Buffett betting big on Metcalf.