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Another smart guy dumping newspaper stocks

?? Buffett's Annual Blog |


| A Krispy, Krafty Comeback? ??

March 07, 2006

Another smart guy dumping newspaper stocks

Aaron Pressman

I was shocked last week when I read that an analyst at well-respected media tracking firm, Borrell Associates, was predicting the death of newspapers unless online advertising booms off the charts. "As more and more people shift their news reading from print to online, the newspaper industry must dramatically increase its online advertising revenues or die," Vincent Crosbie, a senior associate at the firm, told an audience at the World Newspaper Advertising Conference, the UK?? Guardian Unlimited reported (free but annoyingly lengthy registration required for access).

American newspapers garner from $500 to $900 in revenue per print subscriber, he reasoned. So, if print subscriptions continue to decline at 2% to 16% a year, to make up for the lost revenue, online ads would have to increase 40% to 1,600% a year just to keep up. Sounds virtually impossible for all but the best-performing papers. Newspapers captured about $4 billion of the $17 billion in online advertising in the U.S. last year, Crosbie also noted.

So I was much less surprised today as I read through the 2005 annual report for the Olstein Financial Alert Fund (OFAFX) run by super-sharpie Bob Olstein and noticed that the fund had slashed its newspaper investments. At the beginning of 2005, Olstein had almost 5% of his fund in three newspaper owners: Journal Register Co. (Symbol: JRC), Knight-Ridder (KRI) and Tribune Co. (TRB) But by the end of 2005, he'd sold off the entire Knight-Ridder position, almost all of the Tribune shares and a portion of his Journal register shares, leaving only about 1% of the fund in newspapers.

Good thing too. Journal is down 14% in 2006 and Knight is off 3%. Tribune is up 1%. Through the end of February, the fund was up 2.8%. The only newspaper-related comment in the annual report I found mentioned that the fund was getting out of Tribune because "our expectations of future free cash flow were too optimistic." I hear you, Bob, I hear you.

09:24 AM


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