LennyLichtenstein

Am I Crazy to Own Gannett?

Gannet has decreasing revenue on a business line that is unlikely to grow. Gannet cannot cut costs and hope to grow at all. Newspapers have certain fixed costs associated with their operations. Cutting back on journalistic/editorial talent will erode the value proposition they provide and make them more vulnerable to internet competition. Their future business will be far, far, less profitable at the current price point of a newspaper.

Valuation is necessarily forward-looking. It is reasonable to assume that Ganett will never increase their dividend. Could it be reasonably near here in five years? I know discounting the dividend seems like an antiquated method of valuation, but i see no other value to the long-term investor in this instance (other than their enourmously valuable careerbuilder.com). I expect declines in newspaper group profits to be exponential in coming years.

Disclosure: I am long gannet puts