Investing in news stocks can be profitable, like all stock investing, for the investor who searches out bargains and buys stocks before the rest of the market catches on. There has been interest recently in the Washington Post – WPO. The post is said to be poised to give as much as a 30% yearly return to investors in the next few years. Anyone interested in buying WPO, however, should do his own fundamental analysis. We look at a couple of comparisons and offer some of our own thoughts. The Post is a diversified company with TV outlets in the US and a worldwide presence in education and on the internet. Current analyst estimates are that the Post could profit handsomely as it grows its profits from diversified activities above and beyond its core newspaper business. The New York Times – NYT, by comparison, has fallen prey to the electronic age. With a less diversified set of products the newspaper of record has seen its share price fall from the mid-$40 range to the $7 range over the last decade. The stock does not pay a dividend, unlike its rival, the Post. The company has been slower to grow its “digital products” which now provide for around 15% of total income. Investing in news stocks of this sort reminds us of Motorola – MSI – in that it may well be underperforming and underpriced. The Times has the central asset necessary for a news source, great news gathering and writing.
By comparison to both the Post and Times, News Corp – NWS – which owns the Wall Street Journal through its Dow Jones subsidiary, has a worldwide chain of newspapers, all of which can be fed from a central source. News Corp traded for around $6 a share in early 2009 and now trades for $15 or so a share. News Corp demonstrates an efficiency of scale that even the Times and Post cannot match. The question if one is interested in investing in news stocks is which stock offers the best investment opportunity today? Recent analyst predictions would seem to tell us that the Post may be in verge of a rally but just how soon will predictions come true? The Times has been counted down and out before. It is still around and still is a great paper. If it can expand the use of its content and contain costs the Times may well prosper again. If not it could always be a takeover target and be the news generating core of someone else’s news empire.
As always we are not suggesting that investors buy or ignore stock in the News Corp, the New York Times Company, or the Washington Post. Rather we offer this article about investing in news stocks as food for thought for investors interested in discovering and evaluating investment opportunities. For those learning how to invest the point is not to run out and buy a stock because it is mentioned in an online blog or a well know investment column. The point is to look at the stock’s margin of safety versus its intrinsic stock value. Successful long term investors typically find promising but underpriced stocks and buy them before the rest of the market wakes up to the opportunity.