Since we posted on investing in newspapers about a month ago some companies decided to spin off their newspaper assets into separate operating companies. One of the publicly traded newspaper stocks, and maybe two more, offer some interesting investing opportunities. We disagree with the experts who think investing in a newspaper stock is a bad deal. However the point here is to find companies who are heavily involved in the LOCAL newspaper business and not large metros or national editions. The larger newspapers have too much competition and too high a legacy cost to overcome to be consistently profitable. On the other hand local newspapers in the less than 30000 circulation range have a future and can produce steady profits for their owners. So below we will sum up newspaper stocks currently trading.
LEE...Lee Newspapers...Still saddled with serious debt they are slowing digging their way out of over time, too long a time for us. Add in the newspaper mix contains too many large metros for our liking.
MNI...McClatchy Newspapers...The recent sale of Cars.com will allow them to clear out a big chunk of debt, but not enough since they will still owe over a billion dollars in debt, and frankly we do not like the mix of newspapers this company owns. Just too many big city dailies and not enough local newspapers. A long long haul to actually clear out the remaining debt mess and we believe dead money for longer than we care to wait.
GCI... Gannett... will be spinning off their newspaper assets next year as announced just last week. We personally like their newspaper mix and IF Gannett does not saddle the new company with lots of debt as they have suggested there could be some money made here too. Maybe even with a nice dividend. Without debt this newspaper company could go strongly after some additional properties now that there is no concern for overlapping media and federal oversight. This new stock has some serious potential for upside.
JRN/SSP...Journal Communications and EW Scripps will be following the lead and spinning off their newspaper properties soon into a separate company. Again we do not like the newspaper mix containing too many larger dailies. The debt portion handed over is a good bit more than we would have desired but not burdensome enough the new company can not handle the servicing of it.
NEWM..New Media Investment Group...We just discovered this little gem with a 6% plus dividend and very little debt as well. They are very new having been spun off from Newcastle Investments just this year. It has a industry veteran running the operation and what we believe a solid portfolio of local newspapers in the fold. Selling at just over $17, it has moved up $2 per share since we started following it, and we still believe this is an excellent long term entry point. Trading publicly they have access to additional funds and have shown a willingness to be an strategic acquirer. We believe the upside with NEWM could be significant and suggest purchase.
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