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Jonathan Yates
Are Newspapers Yesterday’s News as Investments?

Two of the most venerable names in The Fourth Estate in the United States were just sold for low prices, raising questions about the viability of newspapers as investments.

After paying $1.1 billion for The Boston Globe, The New York Times Company (NYSE: NYT) just sold it for $70 million to John Henry, the hedge fund manager who owns the Boston Red Sox.  Jeff Bezos, the founder of Amazon (NASDAQ: AMZN), bought The Washington Post for $250 million yesterday.  As a point of reference, The New York Times Company stock is now around $12 a share, up more than 50% for the last year of market action; with much of the rise attributed to shedding itself of the (obviously) money-losing Boston Globe.

Despite these low sales prices for The Washington Post and The Boston Globe, two of the world’s richest men, Carlos Slim and Warren Buffett, are heavily invested in newspapers.  Others, such as the Koch brothers, have been reported to be “kicking the tires” of publishing companies.  Sam Zell, another billionaire investor, did very poorly with the Tribune newspapers, including The L.A. Times and The Baltimore Sun, eventually filing for Chapter 11 bankruptcy.

There have been many other bankruptcies in the newspaper business.

But some of the shrewdest investors around continue to pile into the sector.  Newspapers definitely have an advantage over the Internet in terms of servicing the local market.  That is why Buffett has been investing in regional publications.  It would also seem that The New York Times will always have its perch as “The Newspaper of Record”, which could account for why Carlos Slim has invested in “The Old Gray Lady.”  But for the industry as a whole, the bottom market prices for The Boston Globe and The Washington Post can hardly be considered a bullish headline!



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