Bill Nygren on Newspaper Stocks

Excerpt from Bill Nygren's March 31st letter to shareholders of the Oakmark Fund:

We [also] sold Gannett (GCI) at a price just above what we paid for it in 2000 when newspapers were being acquired for about 13 times pretax cash flow. At that time, Gannett looked quite attractive to us, selling at only 8 times. Unfortunately, valuation spreads can close in two directions. We have recently seen substantial evidence that newspapers are not as valuable as they once were. Just last quarter the Minneapolis Tribune was sold for about half the price McClatchy paid for it in 1988, and the estimated value of the Boston Globe was written down to about half the price New York Times Company (NYT) paid to acquire it in 1993. Finally, in our home market of Chicago, the Tribune Company’s (TRB) search for an acquirer barely produced a premium to the stock price. Though Gannett is definitely an example of a “mistake,” it is also an example of how purchasing at a discount to private value can help protect us from loss.

See also: Bill Nygren's portfolio

Comments

[jboschetti:]

Sounds like capitulation. There were plenty of opportunites for him to sell the stock at a substantial profit. Down here the equity is at 8.5x ebitda with a 10% fcf yield. I wouldn't be selling the stock until i knew their plans for all that FCF... these days newpapers are rewarded for returning cash to shareholders(big dividends) and not being acquisitive. The mgmt at GCI have to understand this... just look at GHS.

2007 Apr 23 11:52 AM