Reading the Newspapers and Media Stocks

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It's interesting, to me at least, to watch the old grey lady, The New York Times, as it attempts to get out from under The Boston Globe. The initial thought, when the Times bought the Globe, was that a northeast powerhouse newspaper could really gain some synergies. Guess not, given that the price the Times is hoping to get for the Globe is much less than it paid.

Well, speaking as an old reporter, such is life in the news game. I'm writing online columns and got my investment license, after all. There can still be money in news, of course, but figuring out how to stay big is the biggest headache for the established newspapers. Several of them are trying different things, some of them interesting, some of them dumb. The important thing is that none of them are giving up and going down without a fight. It's the very definition of 'entrenched interests' coming out to play.

The news at this point is that the Times might be able to get as much as $100 million for the Globe. Good for them. Of course, that doesn't really solve the final question of how long the Times can hold out in the face of toughening competition. No one knows the answer to that. What I do know is that it's likely that the Times will be one of the last papers standing once this particular little change-of-seasons ends in 10 or 15 years.

The New York Times (NYSE: NYT)

There are a lot of pieces in The NYT Company. Papers, online businesses, paper mills and so forth--more than most people are aware. Even with all the craziness in the industry, it still maintained a 5.17% operating margin last year. Surprised? I bet a lot of you are.

The Times still has some muscle to flex and is continually trying to revamp its processes to make itself competitive in a new digital age. One can't count them out. The stock is up 50% or so since last May and was higher until a big drop in late October. The best bet is for a slow gain over time. This is a stock to put money in for the long haul, not for short-term gain.

Gannett (NYSE: GCI)

Hey, look! It's a media firm that shows steady growth and a dividend! How refreshing. Most visibly, Gannett publishes USA Today, but it also has other online interests such as CareerBuilder.com. That last can be a real money maker if done right, and Gannett does it right...in general.

The firm has also acquired all or part of several online advertising and data companies in the last two years. It's an acquisition company and trying to grow to stay ahead of the competition. It pays a dividend of 4.03%, and the stock has grown 61% since last June. Gannett could be one you want to have a piece of for your portfolio.

The Washington Post (NYSE: WPO)

Did you know that, in addition to providing the best political news in the country, WaPo provides educational services as well? The firm owns Kaplan as well as other media properties. It also owns cable and broadcast TV networks and systems--it's a well-diversified company. And if you want a job in government or anywhere in DC, you need to go through their washingtonjobs.com site. It's that powerful.

The company keeps its stock way up there. Currently it's sitting around $395 and has gained 22.6% since late October. It also has a not-shabby dividend of 2.41% which, on a $400 stock, comes to a nice piece of cash.

News Corp (NASDAQ: NWSA)

Famously, The Wall Street Journal is owned by News Corp, which also owns Dow Jones, Fox News and so forth. Everyone knows its controversial leader, Rupert Murdoch and everyone feared the the Journal would drop like a stone under the News Corp banner. It hasn't, of course. At least I knew it wouldn't. News Corp knows how to run newspapers (when they're not breaking the law by hacking phones) and has a long history of making the various pieces of the puzzle work together. Even the breaking off of the newspapers from the other units isn't going to completely separate the businesses. Over the last year News Corp stock has appreciated 45% while the firm worked up a 6.5% operating margin. It'll do better coming out of a difficult year. You could do much worse.

The McClatchy Company (NYSE: MNI)

Another one of the large newspaper and digital combined firms, McClatchy is like a second string WaPo or NYT; it's not quite playing in the biggest leagues. McClatchy first came to public prominence when Kevin McClatchy bought the Pittsburgh Pirates and couldn't afford to play with the big boys, leading to decades of misery for Pitt baseball fans. The firm isn't a bad one, but I wish it was a little more muscular in how it does business. No dividend, and it's a stock that's been up and down but finished the last year about where it started. The firm isn't going away anytime soon, but it's also not going anywhere. Stay away.

The smart money in newspapers is that we're entering the endgame. Within 10 or so years we'll have a slew of smaller regional papers and 2-4 large national ones. Which papers and media empires become those regional players is the big question. If you have an answer it's time to invest now in the ones you think will win.

Good luck!

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