Magazine article Editor & Publisher

Bears in the Market Notwithstanding

Magazine article Editor & Publisher

Bears in the Market Notwithstanding

Article excerpt

Newspaper stocks hold steady

Newspaper stocks held fast in last week's roiling financial markets, as a number of value-minded institutional investors continued to buy into the group.

While the S&P 500 Index declined 4.85% between March 9 and March 15, adding momentum to fears of a recession, the S&P Newspaper Index was down only 1.73%.

The stocks responded "beautifully" amid the turmoil, Merrill Lynch analyst Lauren Rich Fine said. "This is the group that doesn't want to go down." Explaining the lack of volatility, Fine and other industry watchers said investors were well-prepared for the weakness that has plagued the newspaper group of late.

Brian Shipman, publishing analyst for Prudential Securities, noted that newspaper stocks tend to discount bad news six months in advance. "I think if the market starts to believe in market recovery and stabilization, this group is going to recover well."

Share prices of the biggest U.S. newspaper companies dipped in midweek, but regained all or some of their value late in the week.

Gannett Co. Inc. stock declined 8.4% from March 9 to March 13, but rebounded later in the week. Knight Ridder stock declined 6.4% from its March 9 close, then made up for some of it to close March 15 down 3.2% from March 9. And the Tribune Co.'s stock declined 6.3% midweek, but closed March 15 down 4.5%.

The group remains down from its 52-week high, however, beset by the deteriorating ad climate and the spectre of rising newsprint costs. Dow Jones & Co. Inc., the New York Times Co., and, most recently, the E.W. Scripps Co., announced that they will miss first-quarter earnings targets. In its latest ad outlook revision, Merrill Lynch forecast 2.5% growth in newspaper ad revenue this year, instead of 3% as earlier predicted.

While several Wall Street analysts have lowered their recommendations on newspaper stocks in recent weeks, some institutional investors are capitalizing on the negativity. …

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