Before airlines and real estate stole headlines for prolonged weakness, newspaper stocks were among the most maligned of the sectors currently operating on Wall Street. The internet revolution caused newspaper and magazine subscriptions to decline sharply and investors to assume that the beginning of a long falls were ahead. Certainly, staying afloat as a print outfit in the internet age is no easy feat, but with the slow integration of internet pay walls and coping mechanisms like TV stations and internet components, it’s not impossible. It’s especially doable for those outfits that already had a globally established and respected brand before content went digital and the 24-hour-news cycle began. These media conglomerates posses’ greater leeway than your run-of-the-mill local record. People will read their content even if they have to pay for it. The New York Times, which recently unveiled their pay wall, serves as proof of the changing landscape and how the top players in the industry are finding a way to keep their heads above water.
That said, the notion of a terminal descent for newspaper has poisoned share prices and left many of these stocks depreciated. That could represent an opportunity for bold investors willing to take the leap. Below are two picks that could see significant price improvement as a result of strength in ancillary business and internal changes.
The New York Times (NYT)
Investing in the New York Times is not exactly a safe bet; just as their decision to put up a $20 a month pay wall was not a safe bet, but early indicators are leading some analysts to optimism. Fear over how the paywall would affect traffic pushed shares down over 20 percent for the year, but depending on the success of the measure, NYT could be seeing brighter days in the near future.
Still, the paywall is not enough to buoy this enormous media conglomerate. The company has a range of oft ignored businesses outside its famous newspaper. The company owns About.com, the website with vague articles about just about everything, around a $600 value, as well as a16 percent stake in the much reviled (by New Yorker’s anyway) Boston Red Sox. It might be a sell-out for the New York staple, but the World Series winners have the potential to generate major revenue. NYT also has a share in their sports network and a number of other local papers peppered across New England.
Gannett is a multi-faceted news corporation that is currently significantly undervalued. It has 81newspapers worldwide, a 51 percent stake in careerbuilder.com and an arsenal of 23 television stations that reach 21 million households or 18.2 percent of the US. They have a well established brand, USA today is among their papers, as well as brand building media solutions that can be applied to mobile apps. According to Smart Money, Gannetttrades for under seven times projected-2011 profit of $2.20 a share, but most analysts predict shares, currently in $14 range only reaching $17 for the year.