The decline and fall of newspapers


The Philadelphia Inquirer has begun a round of layoffs, becoming that latest newspaper to succumb to declining readership. Are newspapers on their way out as a form of popular media? Warren Buffett has said that "Every time someone dies, that is a newspaper reader gone that will not be replaced."

For an excellent excerpt of Buffett and his right-hand man Charlie Munger talking about the future of newspapers, read this. As you read, keep in mind that Warren Buffett's Berkshire Hathaway owns shares of the Washington Post along with several other newspapers.

The apparent contradiction between his ownership of newspaper stocks and his long-term bearishness on the industry is a valuable lesson for investors: valuation matters. Even if newspapers will be gone in 20 years, many are still profitable now and may make a good investment at the right price. It never makes sense to write off a company as an investment just because the long-term outlook is poor. Similarly, we should never buy a stock because it has a great story: valuation always matters, as numerous investors learned painfully during the dot-com crash.

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