Inside Wall Street
NEWSPAPERS WITH LOTS OF BLACK INK
Newspaper stocks had nothing but bad news for investors last year. And with advertising and earnings continuing to slump, analysts are down on the group. But one newspaper stock bears watching: Lee Enterprises, which publishes 19 daily and weekly newspapers. Earnings have been rising, and the stock has bucked the newspaper trend: It's up from 20 in late October to 26.
What's the scoop? "Lee newspapers are in markets insulated from the problems of real estate and Wall Street--two troublesome areas that have plagued other cities," says investment adviser Dan Seiver. Seiver is editor and publisher of PAD System Report, a market newsletter whose name stands for "patience and discipline." He notes that Lee's newspapers, which account for 65% of earnings, are published in eight Midwestern and Western states--Illinois, Iowa, Minnesota, Montana, Nebraska, North Dakota, Oregon, and Wisconsin. Among its large newspapers are the Madison (Wis.) State Journal and the Lincoln (Neb.) Star. Lee also owns and operates five television stations.
Seiver says the economic slump, the plunge in home prices, and the severe retrenchment in the securities industry haven't hurt these Middle-American markets much. He also notes that Wall Street tends to mark down all stocks in an industry it has consigned to the doghouse and that "carefully screening them often yields a winner." Lee has had steady 12% growth over the years and a strong balance sheet. Seiver expects earnings of $1.85 a share in the year ending September, 1991; $2.10 in 1992; and $3 in 1993. "The stock should double in about a year," he says.GENE G. MARCIAL