Stop the presses! Someone says something nice about a newspaper stock. Yep. It's true. Deutsche Securities upgraded the shares of Lee Enterprises (symbol LEE) on January 17, and the stock responded with a 5.5% gain, to $31.90. That's a big splash for a group of stocks that seem to have been bleeding red since the millennium. Such storied news chains as Gannett, McClatchy and Tribune have either imploded or sagged so long that only a masochist or a rock-ribbed contrarian would invest in them now and expect much appreciation. Tribune's inability to find a buyer willing to pay much of a price summarizes big money's disdain for newspaper investments.
But smaller, under-the-radar companies may be better bets, particularly if they can demonstrate rising circulation in suburbs and faster-growing small cities. There's also the promise of online ad riches. Lee, which is based in Iowa and owns 58 dailies in 23 states and a slew of weeklies, recently reported that its online ad revenue is growing more than 50% annually, compared with an industry average of 25%. The Web brings Lee just 5.5% of its ad income now, but the trajectory is impressive. Continued growth of Internet ad sales would mitigate much of the decline in classified revenues.
Moreover, circulation is up at most of Lee's daily papers, including, improbably, its largest property, the St. Louis Post Dispatch. St. Louisans are avid newspaper readers and baseball fans. Advertising and newspaper sales bumped up last year as the Cardinals unexpectedly won the World Series.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Getting back to the stock, Lee shares sell at about 20 times earnings, which is expensive for a company in a troubled sector. But Lee produces healthy free cash flow (earnings plus non-cash charges, minus the capital expenditures needed to maintain the business), pays a good dividend (the stock yields 2.5%), and is working down the long-term debt it assumed to buy the Post-Dispatch and the Arizona Daily Star in 2005.
Lee is still old media, but if you're game for an overlooked stock in a sector that's out of favor, it's a name worth considering.
-
Why Is Warren Buffett Selling So Much Stock?Berkshire Hathaway is dumping equities, hoarding cash and making market participants nervous.
-
Fed Cuts Rates Again: What the Experts Are SayingFederal Reserve The central bank continued to ease, but a new administration in Washington clouds the outlook for future policy moves.
-
If You'd Put $1,000 Into Google Stock 20 Years Ago, Here's What You'd Have TodayGoogle parent Alphabet has been a market-beating machine for ages.
-
Fed Goes Big With First Rate Cut: What the Experts Are Saying
Federal Reserve A slowing labor market prompted the Fed to start with a jumbo-sized reduction to borrowing costs.
-
Stock Market Today: Stocks Retreat Ahead of Nvidia EarningsMarkets lost ground on light volume Wednesday as traders keyed on AI bellwether Nvidia earnings after the close.
-
Stock Market Today: Stocks Edge Higher With Nvidia Earnings in FocusNvidia stock gained ground ahead of tomorrow's after-the-close earnings event, while Super Micro Computer got hit by a short seller report.
-
Stock Market Today: Dow Hits New Record Closing HighThe Nasdaq Composite and S&P 500 finished in the red as semiconductor stocks struggled.
-
Stock Market Today: Stocks Pop After Powell's Jackson Hole SpeechFed Chair Powell's Jackson Hole speech struck a dovish tone which sent stocks soaring Friday.
