Old Media...Undervalued Cash Cows

We will admit we have been incorrect so far in this pick, but we still believe this is a great buying opportunity.  The stock here is New Media Investments, symbol NEWM, which owns a nice portfolio of small to medium sized newspapers many of which are dailies. Yes we know newspapers are so yesteryear, but stay with us here, we are talking about smaller newspapers in markets where the news is not covered by big television stations or national media. In my own state look at some of the properties they own,  Jacksonville, New Bern, Wilmington, Asheboro, Burlington, Lexington, and Shelby just to name a few. These towns are not covered by a large television station or a large newspaper, the people in these towns consume news too and the only way to get LOCAL news is by their local newspaper.  No one covers the town councils, the school boards, local business, local news other than the local newspaper there.  Add in there is little no competition in these towns for the local media.  So with a demand for news and the local newspaper being the only supplier they got a nice market position.  Many in these towns have lived there all their lives and are loyal to local media as well. 

So the owner of these newspapers has a market position and with the economics of newspapers finally getting down to basics now since the end of the overvaluation era newspapers one can make some nice profits.  Many of these properties are showing cash flows of 20% plus, which in any business is a very nice profit.  Add in that NEWM is buying these properties cheap and they need little or no capital investment to keep the cash flow going.  We have been in the media business now for right at 4 decades and we believe we know the deal here, but if you do not believe us maybe you will believe some other investors.  Lets start with Warren Buffet who has a very nice portfolio of these newspapers,  how about Carl Icahn who recently loaded up a another of these stand alone newspaper companies, Gannett.   Finally Leon Cooperman, one of the smartest and wealthiest investors today, just bought another $2 million dollars worth of NEWM, and he already owned over 10% of the company. 

We might be wrong here and with the stock down from the mid $20's to now just over $17 those of us who own shares have felt some pain. This stock and Gannet, symbol GCI, look like good buys here. We believe NEWM is an outright steal below $18 and we own 4800 shares so we buy our own home cooking too.  There is capital gain potential and you are paid well to wait.  How about almost 8% well covered dividend too.  So take a look at these two old media newspaper companies as part of your portfolio.  NEWM will be reporting second quarter earnings July 30 so either buy before for a bump or after for some more assurance.