Should you follow Buffett into newspaper stocks?

The Oracle of Omaha keeps investing in an ancient form of media.

By Benzinga Feb 5, 2013 5:04PM
Newspapers Janis Christie Getty ImagesBy Tim Parker

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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13Comments
Feb 5, 2013 7:40PM
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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. 

Feb 5, 2013 10:21PM
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He's probably more right than wrong. Somebody posted something about "kids". Kids are idiots who create social trends and fads. They never last and often crash. When you look at online media but you remember news in print, you realize that half of our current issues are caused by technology, and half of our setbacks would be corrected through reading, as in newsprint.
Feb 5, 2013 9:45PM
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the newspapaer gives the printed words brand identity, look at this way you can read local news online or in paper form but people still prefer the old printed version, especially if  friends or family are in and printer ink is very expensive to use at home
Feb 5, 2013 6:35PM
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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...??

Feb 5, 2013 6:45PM
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Buffet is too old to realize that the printed media is dead. Unless he can quickly figure out a way to consolidate them and make money off the internet it was a bad investment.
Feb 5, 2013 6:37PM
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Do YOU really think Kids are reading NEW'S ITEMS on their handhelds ??

 

About this Bridge...?? 

Feb 5, 2013 9:35PM
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I thought Tramp was buying the NYT ? yuk,yuk,yuk.
Feb 5, 2013 8:01PM
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And as for an answer to the "original question"...?

 

No, we are not really interested in investing in any Newspapers. 

Feb 5, 2013 7:40PM
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I might give the man some respect when he pays his past taxes, gets out of bed with Obama and stops deceiving the stupid people about capital gains taxes as opposed to regular income taxes....until that happens I will consider him a crony capitalist.
Feb 5, 2013 5:55PM
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He's a fool.    Like the time he bought into airlines and lost his a**.   He's an emotional investor.   Kids don't hold newspapers.   They hold iPhones and read their stories there.     He should have sold Coke awhile back but he again is emotional and holds onto products from his past.

Face it.  He got lucky in insurance underwriting and after that got big deals the little guy couldn't get.  
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