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Chasing Value: Gannett as value play - not for me

Posted May 23rd 2007 4:28PM by Sheldon LiberSheldon Liber RSS Feed
Filed under: Newspapers, Internet, Competitive strategy, Apple Inc (AAPL), Columns, Gannett Co (GCI), Huaneng Power Intl ADS (HNP), Bargain stocks, Chasing Value, IndyMac Bancorp (IMB), Amer Home Mtge Investment (AHM)

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A few days ago I received the following inquiry from a frequent reader of my blogs on Chasing Value.

    Hi Sheldon, what do you think about: Gannett Company (NYSE: GCI)

    P/S - 1.72, P/B - 1.65, P/cash - 9.9, dividend - 2.1%, P/E - 12.4

    Publishing sector - quite hot at the moment? ...alex

Alex , you are developing a pretty good understanding of the numbers I look at. Now you should add something else to your calculations. The actual business it is in. When we look at American Home Mortgage Investment (NYSE: AHM) (see Someone asked about Amercian Home Mortgage) or IndyMac Bancorp (NYSE: IMB) (see Chasing Value: IndyMac Bancorp - once in a lifetime,) or many other fallen banks and mortgage companies, we can be confident they will bounce back if they survive the lows. There will always be banks.

Now consider GCI is the largest owner of two fading businesses: newspapers and TV, both of which are being creamed by the Web. Face-Book just added free classified advertising and Apple Inc. (NASDAQ: AAPL) and all the internet players are creating another version of Web TV. At a minimum GCI's value will continue to be diluted.

Looking at the fundamentals, it may be a value play, but it is not a business I want to be in. I would rather own a few more banks or insurance companies or power companies or railroads. Since you read my stories, look at it this way: Huaneng Power Intl ADS (NYSE: HNP) has gone from $26.50 when I recommended it to $45. Even if you bought today at the high and it went down it is still a great long term hold because you can be sure it will have many decades of growth. I have no idea where GCI will be in a few years. Not to say it will not be a successful company, but I just do not have confidence in what that company will look like, given the new media landscape.

Keep studying, saving and investing - Peace - Sheldon

Those of you who are new to BloggingStocks can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.

Tags: Amer Home Mtge Investment (AHM), AmerHomeMtgeInvestment(ahm), Apple Inc (AAPL), AppleInc(aapl), Chasing Value, ChasingValue, Gannett Co (GCI), GannettCo(gci), Huaneng Power Intl ADS (HNP), HuanengPowerIntlAds(hnp), IndyMac Bancorp (IMB), IndymacBancorp(imb), Newspapers, Sheldon Liber, SheldonLiber, stock picking, StockPicking, value investing, ValueInvesting

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Last updated: November 24, 2009: 09:43 PM

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