Should you follow Buffett into newspaper stocks?
The Oracle of Omaha keeps investing in an ancient form of media.
Gannett (GCI) was down Monday along with The New York Times (NYT), Lee (LEE), McClatchy (MNI), Journal Communications (JRN) and Media General (MEG).
As media companies have scrambled to reinvent themselves, their customers have discovered cable television news, the Internet and texting. The media business has changed and that's not good for the newspaper business.
In the midst of this electronic information renaissance, Warren Buffett has been buying newspapers. And mostly not even large ones. Many of Buffett's acquisitions have circulations of around 60,000.
What does Warren know? What insight does the Oracle of Omaha have that the rest of the world does not?
Buffett's recent purchase of the News & Record in Greensboro is only the latest in a string of investments in daily newspapers his company, Berkshire Hathaway (BRK.B) made.
The biggest purchase came last year, when he bought several newspapers from Media General, including the Winston-Salem Journal. So, what's the attraction?
Buffett revealed both his newspaper philosophy and strategy to Howard Kurtz at the Daily Beast.
First, he is a fan of newspapers. He likes to hold them and he likes to read them.
He also has faith in them. He thinks newspapers have a specific role to play in society and serve a valuable purpose.
However, Buffett doesn't see the old school paper boy once again standing on street corners screaming, "extra, extra, read all about it" any time soon. He told Kurtz that he is not counting on newspapers to be a big part of Berkshire Hathaway's revenues or growth.
Still, he thinks there is profit potential. One of the reasons for this, Buffett believes, is because buying newspapers has become less expensive. The terms of the News & Record deal aren't publicly known, but it is almost certainly less than the owner was asking.
According to a report by Devin Leonard in Bloomberg Business Week, newspaper properties were selling for about nine times EBITDA (earnings before interest, taxes, depreciation, and amortization) prior to 2006. Bloomberg estimated that Buffett paid only four times EBITDA for the Media General papers.
Buffett further believes that newspapers must have a local focus. "They have to serve smaller markets where there is more a feeling of community," Buffett told Kurtz.
Finally, Buffet believes getting younger people to read the printed word is not a lost cause: "High school sports will pull them into the paper," he told Kurtz.
Buffett has backed up his faith in the printed word by amassing 27 daily newspapers all together.
The News & Record has a daily circulation of about 58,000, which fits nicely with BH Media's other newspapers, most of which are similar in size. BH Media Group is the division of Berkshire Hathaway that operates its newspapers.
Berkshire also holds stakes in Lee Enterprises, Gannett, and The Washington Post Co. (WPO)
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Although everything thing Buffet does, isn't always correct or a "winner."
I would hardly call "him or his company" foolish or a fool ??
That just kind of sounds, childish or a touch of envy...
I have followed and sometimes subscribed to his ideas or investing...It has helped us.
But there have been times, that I also don't agree...But I'm hardly jealous.
He did have family help when younger, and got an Education...
But then worked very hard, and put in long hours to get where he is today...
He is a multi-billionaire of a different sort and going to give most of his fortune to charity..
In My Opinion....He is a very good Man, among men.
Maybe he's buying some History or Rights to it, with certain things or practices,"being trademarked."
Who knows sometimes with Warren, Charlie and Berkshire...??
Do YOU really think Kids are reading NEW'S ITEMS on their handhelds ??
About this Bridge...??
And as for an answer to the "original question"...?
No, we are not really interested in investing in any Newspapers.
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