Herb on newspaper stocks

by: David Jackson posted on: February 06, 2005 | about stocks: JRN / KRI / TRB

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Here's what Herb Greenberg has to say about newspaper stocks:

Lunched Wednesday with Bob Olstein of the Olstein Financial Alert Fund,
who was here giving a string of speeches. (Disclosure: I'm an investor
in his fund.) He said he sees more in the way of "very" high quality
earnings than he has seen in years. Still, he says valuations on a
scale of one to 10, with 10 being the worst, are around a six. His fund
is 10 percent in cash. It was in 30 percent cash at the peak of The
Bubble.
We got to talking about publishing and I repeated to him something I
floated the other day in my subscription newsletter, Herb Greenberg's
RealityCheck: That I think publishing stocks are about where biotech
stocks were a few years ago -- it's like they've got the plague. Find
out how to subscribe here. If it weren't for the fact that I can't own
individual stocks, other than my employer, I'd buy a basket of stocks
in down-and-out companies whose primary business is newspaper
publishing. I'd actually like to invest in a fund that owns nothing but
publishers, but there aren't any. While business may be tough,
newspapers aren't going away. There may be mergers, further losses --
who knows? But it's still a business with plenty of good brands that
eventually will adjust their models to life in the Internet age.
Olstein agrees and as prices have been dropping he has bought several,
including Tribune, Knight-Ridder and Journal Communications, with an eye on others. How cheap are they? Over
time, he believes Tribune (one of my many former employers) could be
worth anywhere from $46 to $63 a share. That's a big spread, but 20
years ago, when Caterpillar was trading
at $10, nobody ever thought it would be $91, which is where it trades
today. And when it comes to Wall Street's idea of excitement,
newspapers are currently where heavy equipment was back then. (Okay, so
you can't build roads in China with newspapers, but who is to say
domestic newspaper companies won't merge with those abroad!)