It's time to short newspaper stocks
When advertising inserts go, so will what's left of the industry.
By Lawrence Meyers
Last week I had lunch with a fellow who's been a journalist for a very long time. He knows the business, he knows everyone in the business and he knows the dirty secrets of the business. He thinks Warren Buffett was crazy to buy Media General (MEG). He also thinks, as I do, that newspapers are toast and you'd be crazy to be buying those stocks right now.
He believes two primary factors are behind plummeting circulation. The first is the plethora of news offered for free all over the Internet -- newspapers don't offer anything unique or original. If you want news, you pull up Google (GOOG) News, and you get the same content. There are no great writers at the newspapers anymore, so why bother? Substantive analysis is in the blogosphere now.
The other reason is that America is a center-right nation politically and, right or wrong, the vast majority of newspapers are seen as having a left-wing bias. With so many alternatives available, Americans don't have to put up with that anymore if they perceive such a bias.
The only thing keeping newspapers afloat, amidst severe declines in advertising revenue, are those inserts you see from your local businesses. Those Staples (SPLS), Office Depot (ODP) and OfficeMax (OMX) inserts, and the coupons from Kroger (KR) and Safeway (SWY) are all newspapers are left holding onto -- that and maybe some movie ads.
These big companies are still scared to pull those ads. They aren't completely sold yet on other forms of advertising. This journalist, however, is absolutely convinced that such a day will come. And when it arrives, the first company to yank its ads will open the floodgates.
Everyone will follow, and that will spell final doom for the newspaper industry. These businesses will realize that declining circulation isn't good for advertising their wares. The day you hear the first of these folks are abandoning newspapers is the day to short the sector, if you haven't already.
Lawrence Meyers does not own shares in any company mentioned. He's president of PDL Capital, Inc., which brokers secure high-yield investments. You can read his stock market commentary at SeekingAlpha.com. He also has written two books and blogs.
More on Investorplace
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
The retailer labels the character's fake memoir as non-fiction. This comes weeks after it categorized the the Bible as fiction.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.