You heard me right: Publicly traded newspapers stocks have been doing quite well lately.
Here are the numbers comparing three-month lows (typically around March 9) with prices at Monday's close:
| COMPANY | THREE-MONTH LOW | MAY 11 CLOSE |
| New York Times | $3.50 | $6.81 |
| Gannett | $2.00 | $5.35 |
| McClatchy | $.40 | $.69 |
| Lee | $.40 | $1.65 |
| Media General | $1.40 | $3.40 |
| Washington Post | $308 | $370 |
| E.W. Scripps | $.80 | $1.96 |
| A.H. Belo | $.70 | $1.61 |
| Journal Communications | $.40 | $1.66 |
So an adroit market timer (and don't try this at home or elsewhere) could have doubled his or her investment in a couple of months by cashing out today.
I'm not licensed to give investment advice but would qualify this piquant news with a few cautions for any reader tempted to take a flyer on a continued run-up of newspaper stocks:
- Many investment funds, by policy, do not buy stocks trading at below $5.00 a share. Such stocks are considered too risky, carrying a risk of bankruptcy, in which shareholders typically get nothing.
- The absolute share prices remain very low, a small fraction of what these companies once traded for. That reflects poor earnings prospects and worrisome levels of debt. The one exception is Washington Post, which includes the growing Kaplan education services company and a profitable cable operation. It carries little debt, was trading much higher in the first place and therefore shows a more modest percentage increase.
- As noted above, buying cheap stocks is much riskier than holding a typical equities portfolio. Like a night at the blackjack table, you can lose your whole stake quickly -- or occasionally, you can double or triple your money, but only if you are disciplined enough to walk away at the right time.
Qualifiers aside, however, it is surprising that the market has quietly zigged forward in a period when the drumbeat of doom forecasts for the industry just keeps getting louder.
Why the run-up? The market overall is up about 30 percent from its low, also around March 9. Some think the stimulus package will begin to work by the end of 2009, even if pockets like real estate, finance and the domestic auto industry remain weak.
Finally, I think some investors buy into my standard line when asked if there are glimmers of hope for the industry: "the recession will be over sooner or later." Then advertising may bounce back, strongly in some categories like auto where nervous consumers have postponed purchases.
A recovery is not going to wipe away intense competition for newspaper organizations to hold advertising dollars against an array of digital marketing options. But it certainly could make the companies worth more than a dollar or two a share for a window of several years.
Coming next: Three multi-millionaires offer contrasting views of the industry's future.
Dale, you are certainly right that these gains are not...
