Sometimes the collective wisdom is not so smart. A few years back, with the burgeoning popularity of e-book readers such as the Kindle and Nook and the demise of bookstores, particularly the country's second-largest chain, Borders, readers, publishers and bookstore owners all seemed to agree that e-books were the future and hardcopy books were doomed to oblivion.
Not so fast. Maybe traditional books will go the way of LPs and tapes, but right now they are holding their own. The New York Times recently noted that analysts once predicted e-books would overtake print by 2015, only to find that e-book sales fell 10% in the first five months of this year and that they now account for about 20% of the market -- roughly their market share a few years back.
What has happened with books may happen with newspapers, or at least that is what Gannett (GCI) seems to be betting on. The decline of newspapers, in digital and hardcopy format, while readers go elsewhere for their news seems to have slowed. The New York Times recently announced the number of its digital-only subscribers just topped 1 million for the first time.
Certainly the values of newspaper companies have dramatically declined in recent years, but this could present opportunities for operators able to buy on the cheap and squeeze out costs through economies of scale. This appears to be the strategy Gannett relied on when it agreed to purchase for $280 million the Journal Media Group, which includes more than 15 newspapers in such cities as Milwaukee, Memphis, Naples, Florida, and Corpus Christi, Texas. "Doubling down on newspapers" is how one analyst described the deal to The New York Times.
Even before the deal, Gannett was the country's largest newspaper publisher by total daily circulation. Its newspaper holdings include USA Today, The Arizona Republic, The (Cincinnati) Enquirer and dozens of others. If you believe that newspaper company values are now a deal and that newspapers are beginning to find a way to make it in this new digital world, Gannett is a stock worth an investment.
Banking on Gannett is also recommended by my Kenneth Fisher-based strategy. This, along with a number of others, is an automated strategy I created based on the writings of this well-known investment strategist, Forbes columnist and money manager.
The Fisher strategy likes Gannett for a number of reasons, earning it the label of "super stock" based on its desirable price-to-sales and debt-to-equity ratios. A P/S of 0.75 or less is considered a tremendous value, and Gannett's is a nice-and-low 0.58. As for its D/E ratio, it does not get better because the company has no debt. Add to these factors such pluses as a very strong earnings-per-share growth rate, positive free cash per share and a solid three-year average net profit margin of 7.63% and you have a stock that reads ¿ investment-wise -- as well as its newspapers.
