Wednesday, September 12, 2012

Stock | For Smead, GCI need only survive 5 years

Mutual fund manager Bill Smead likes Gannett's stock -- a lot. Here's why, according to Bloomberg News:

A lot of people think the newspaper business is dying. Warren Buffett doesn’t and we don’t. Gannett trades at four times cash flow and they retired $3.3 billion of debt in the last five years, raised dividends 150% and are doing stock buybacks. Maybe Gannett doesn’t last 50 years but at the price we’re paying, it only needs to survive like, five for someone who owns the stock to get their money back. If it lasts longer -- say 15 years -- it will be a great investment. Professional journalism is probably the most undervalued it’s been in my 54 years of life. We get a free bet on the newspapers with this stock, as Gannett also own 23 television stations and and other Internet-based properties. We’re paying about $15 a share and it’s worth at least $25.

A new high
GCI finished trading yesterday at $17 a share, up 4.3% -- another 52-week closing high. Shares are now up a whopping 73% from a year ago vs. a much smaller 24% gain for the broader S&P 500 index, according to Google Finance.


  1. I'm missing something here.

    Gannett's annual dividend is 80 cents a share. Assuming it doesn't change, an investor will earn $4 in dividends over the five-year period Smead is referencing.

    Under that scenario, how does he recover his $15-per-share investment in only five years?

    Seems like it should actually take 18.75 years (15/.80) to get back the original investment.

  2. I love Wall Street guys. Love they way they so coldly talk about a companies future as if it's a collection of brick, steel, and dry wall. As long as they're making money they don't give a shit about anything else.

    And yeah...I know how the world works so you can save your "that's the way the world works" responses. I'm just saying.

  3. Mr. Smead forgets one of the most basic principles of investing: Past performance is no guarantee of future results.

    Another boneheaded idea is that "professional journalism" is "undervalued." Nobody has ever paid a dime for "professional journalism".

  4. There is a key bet that Smead and others are making - that newspaper advertising won't go off a cliff.

    If that happens, then Smead will never recover his $15 a share investment. If revenues continue to steadily decline, however, then he still has a shot at making money, and that's what he's counting on.

    Gannett's challenge is to hold onto those print advertisers even as the average age of the readers approaches 60 and even as research shows that newspaper advertising is horribly overpriced for what it delivers.

    Once print advertisers figure that out, they'll be gone. Unless, that is, they fit the new print demographic: 60-plus, traditional in their view of the world, probably grandparents.

  5. It appears 54 year old fund manager Bill Smead will do well with his Gannett investment if he lives five years. If he lives longer - say fifteen years - he will do very well with his investment.

  6. Mr. Smead speaks the ruthless language of Wall Street. Newspapers are doomed. And what's left is going to be mostly a mess. A few will pay for the NYT or WSJ and nothing else.

  7. I think this guy has called it spot on. Gannett is making a lot of money on-line and ad customers are getting response to the ads they place with our websites. The on-line audiences we have built are growing significantly and we're really starting to make good money from them. For the first time in many years I feel confident that we have a bright future and the stock price is only just starting to reflect that.

  8. 8:28, I'm with you. Sigh. That's why for all of us, at some point in our career/job, we have to decide whether we give up a little (or a lot) of personal integrity to get a promotion and a more comfortable lifestyle. Or have a little less, live within our means and sleep soundly at night knowing that we've done our best to do no harm.


    Mr. Smead is just one of thousands of professional investors. Most of whom have their own views and opinions of the world.

    Just like the "experts" in D.C. and NYC. None of them have a lock on "the truth" and the future.

    Remember that, on your next story. When some slick joe complains about "false equivalence" -- translation, he/she thinks he/she is smarter than everyone else.

    Warren Buffett's bought in. At bottom, it could be a tax loss.

  10. This guy's analysis is so boneheaded. What investor in their right mind would be willing to lose their original investment in exchange for the dividends? Dividends are supposed to be extra in investing. I know people who have a lot of money invested and I would never encourage them investing their money in GCI. It's too much of a risk.

  11. @4:22 - Gannett is not making a lot of money online. Gannett is using content mostly created for its print and broadcast products and repurposing it for an online revenue stream. If the online portion had to pay for the content that it's selling advertisements around, it would be operating at a loss. Therefore, the company has to keep the print and broadcast divisions afloat. That's looking harder and harder as newspapers continue to lose readers. And, as another poster pointed out, newspaper advertising doesn't seem to provide a good bang for the buck. That puts the company in a very tenuous position.

  12. 10:47 PM is quite right. The online news business is very much a product of the print news people. Digital subscriptions are modest in volume. I remain worried. The stock is up partly on a momentum play and there's a lot of short covering. And oh, what about the oncoming recession?

  13. Only a few newspapers will survive a second Obama term. Mostly the smaller ones, because of a lack of local digital competition, the very largest, and anything Murdoch owns.

  14. 5:11, I doubt you have to worry about being promoted. You don't get it at all. If you seriously think that people have to sacrifice integrity to get promoted, then I hope your workplace fires you tomorrow.

    Look at Jim. He has no integrity, and he hasn't worked in years.

  15. Under Al's watch, I'll file a request with the SEC, for a hearing, to suspend Gannett from trading. stock, on the big board. After communication, with an SEC investigator. I withdrew it. I sometimes wonder what have happen i f I went threw with it.


Jim says: "Proceed with caution; this is a free-for-all comment zone. I try to correct or clarify incorrect information. But I can't catch everything. Please keep your posts focused on Gannett and media-related subjects. Note that I occasionally review comments in advance, to reject inappropriate ones. And I ignore hostile posters, and recommend you do, too."

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