Newspaper Businesses Still Have A Lot Going For Them (MNI, DJ, WPO, NYT, GCI)

In The New Yorker, biz writer James Surowiecki makes a compelling contrarian case for the newspaper business, a sector that's -- to say the least -- fallen out of favor on the Street these days. Surowiecki, who seems incapable of writing an boring sentence, first notes the challenge from you-know-where:

The Internet has demolished the economics of the industry, allowing people to read, free, news from many sources, and providing a cheaper platform for classified ads. Habit may keep readers around a while longer, but spending billions on a collection of newspapers now looks like the proverbial shuffling of deck chairs on the Titanic.

But then lays out these fundamentals that the papers still have going for them:

● Margins: 'Most of them have profit margins that dwarf those of the average company; McClatchy’s operating margin last year was twenty-eight per cent, while ExxonMobil’s was around sixteen per cent, and the typical supermarket’s is around four per cent.'

● Huge reach

● Great demographics for advertisers

● Cost-cutting and improving profitability well underway

● Network effect still strong on classifieds

● Building stronger online presence

Surowiecki concludes:

it’s... clear that this moment of supposed doom represents a sizable opportunity for newspapers, a chance to reinvigorate their product and, eventually, improve the economics of their business. Seizing that opportunity is going to require new investment, not penny-pinching.

Investors in the following newspaper businesses should certainly give the column a read. Click on the ticker for further opinion and analysis of the stocks:

● McClatchy (MNI)
● Dow Jones (DJ)
● Gannett (NYSE: GCI)
● Journal Communications (JRN)
● News Corporation (NWS)
● New York Times (NYT)
● E.W. Scripps Company (SSP)
● Tribune Company (TRB)
● Washington Post (WPO)