Another Analyst Turns Bullish (Sort Of) On Newspaper Stocks

By: E&P Staff

Newspaper stocks have come back so far from their parlous state a year ago that the sector now ranks among the market’s best performers, the chief analyst for Zacks Investment Research Inc. says in his latest report.

Zacks Chief Equity Strategist Dirk Van Dijk says newspapers now rank seventh-best among 206 industries tracked by the Chicago-based firm. Two stocks — Gannett Co. Inc. (NYSE: GCI) and The New York Times Co. (NYSE: NYT) — are now given No. 1 ratings in its stock evaluation system.

Newspaper stocks across the board are trading at or near 52-week highs, and some have rebounded spectacularly since hitting all-time low prices in the winter of 2009.

Gannett’s share price, for instance, is up 103% from a year ago. Stock in The McClatchy Co. (NYSE: MNI) sunk below $1 a share last year, and only narrowly avoided being delisted by the New York Stock Exchange. A year later, McClatchy shares have soared 322%.

Still, newspaper stocks remain near historic lows. McClatchy shares in January of 2005, for instance, traded for around $60. On Wednesday, McClatchy shares closed at $5.06.

The low expectations for the sector is the main reason to be excited about the prospects for newspaper stocks, Zacks’ Van Dijk writes.

“Yes, papers face declining circulations, particularly among the young,” he writes. “They are, however, often local monopolies, and advertisers still find them useful. … While they may never return to their glory days, that doesn’t mean that they are all going to go extinct in the near future, either. Most have greatly reduced their costs over the last year, so just a small pick up in revenue should lead to large gains on the bottom line.”

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