Frontrunning The Buffett
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Finally! Lee Enterprises (NYSE: LEE) has someone on their side of size! I just woke up to a text from my friend, "Front running Buffett .... Not bad."
Warren Buffett has found the space that I've been screaming about. I tried to call him a month ago but his secretary blocked me, as she has before a few years ago the last time I tried to call in about Conseco. Maybe he'll try to contact me if I send up smoke signals? I saw that he had bought Lee's debt from Goldman Sachs back in April. Goldman Sachs loses again!
I've been running around screaming about this stock, evidenced here and here at the fool as well as here, here, here, here, and more places but I don't want to get winded. My father freaked out when he found out that I was building a monster position in his portfolio of "some newspaper penny stock" that he had never heard of.
So, you're new to the story, you've never heard of the company, and you want to know if you should buy? The short answer is yes, especially since now you know that large investors are giving the company a closer look. Over the last year the only lenses they've looked at this company through have been of the most pessimistic variety. If they were to switch to anything remotely optimistic, as I suspect they will across the coming 12 months, prepare for higher prices!
This is a company that has projected operating income of $100M a year for the next 3 years and a market valuation of less than $100M. I think that the valuation supported here by the fundamental free cash flows could easily be over $3 once the fear subsides that has persisted for over a little over year now as the company has pulled into liquidation station and hasn't pulled out until... perhaps now? Their adjusted EPS for the last 6 months ending at the end of March were $0.33. That puts their P/E for only half a year at around 4 right now. That's still crisis pricing.
I think that with a large investor with a strong history like Buffett on board, this thing will at least trend towards the lower end of intrinsic value, which is still much, much higher.
What else? Buffett has been buying Media General (NYSE: MEG), another stock that I've picked out as worth owning before he started acquiring. Other companies that I'd highly recommend that you should take a look at if you want to be a few steps ahead of Buffett include the McClatchy Company (NYSE: MNI) and Gannett (NYSE: GCI).
Want a crazy prediction? After newspapers Buffett is going to see opportunities in phone books. I'm talking Yellow for all of you Canadians out there.
Glen is long Lee Enterprises, Media General, McClatchy and Gannett. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.