The reports of newspapers' demise have not been greatly exaggerated. The Rocky Mountain News, Colorado's oldest newspaper and one of two daily papers in Denver, announced it will publish its final edition, Friday, February 27th.

The date is two months shy of its 150-year anniversary.

Update: The final issue of the paper was printed today, February 27th, with a commemorative edition whose headline read "Goodbye Colorado" and which included some of the newspapers' Pulitzer Prize-winning photographs and stories. The headline on the front page read "Stop the Presses."

The paper had been sharing business services, including advertising and printing, with The Denver Post in a U.S. Justice Department-approved arrangement since 2001. As of Saturday, however, the editorial voices in the community will be reduced to one.

Riddle me this investors: is the smart money heading into newspaper stocks? Don't laugh but CNN/Money's Paul La Monica points out that some well-known funds are increasing their stakes in this most hated of sectors on Wall Street.

But before people start loading up on the New York Times Co. (NYSE:NYT), E.W. Scripps Co. (NYSE: SSP), Gannett Co. (NYSE: GCI), Lee Enterprises Inc. (NYSE: LEE) or McClatchy Co. (NYSE: MNI) consider that these shares are down double-digit percentage points because their businesses are floundering. Yes, online advertising revenue is picking up but remember that these companies will get the vast majority of their profit and revenue from dead trees for some time to come.

But has all of the bad news been priced into these stocks? Ariel Capital Management, Wellington Management, T. Rowe Price and Fidelity Management and Research seem to think the stocks have nowhere to go but up, La Monica says.

They are certainly buying low. Can they sell high?

MOST NOTEWORTHY: Select newspaper stocks and Dolan Media were today's noteworthy initiations:

• Banc of America initiated six stocks in the newspaper sector with Neutral ratings: Gannett (NYSE: GCI) was started with a $51.50 target, citing a lack of clarity into the company's acquisition strategy; New York Times (NYSE: NYT) was started with a $21 target, reflecting a lack of clarity into the company's acquisition strategy; E.W. Scripps (NYSE: SSP) was started with a $43 target, as the firm feels the company's Interactive division is a "big question mark" that could drag down company growth; McClatchy Co (NYSE: MNI) was started with a $26 target, as the firm is positive longer-term, but sees downside risk to 2007 consensus estimates; Lee Enterprises (NYSE: LEE) was initiated with a $19.50 target; Gatehouse Media (NYSE: GHS) was started with a $12.50 target.
  
• Dolan Media (NYSE: DM) was initiated with an Outperform rating and $24 target at Piper Jaffray. Piper believes DM's Q3 guidance is conservative given the default rates in July and August and notes the company processes defaults in two of the three highest default rate states. Dolan Media was also started with a Buy rating and $26 target at Merrill Lynch and with a Buy rating and $28 target at Craig-Hallum.

OTHER INITIATIONS:

• Think Equity assumed coverage of Intel Corporation (NASDAQ: INTC) and Micron Technology (NYSE: MU) with an Accumulate rating and $26 target and a Buy rating and $18 target, respectively.
• Citigroup started shares of Royal Caribbean Cruises (NYSE: RCL) and Carnival Corp (NYSE: CCL) with Hold ratings.
• SuperValu Inc (NYSE: SVU) was started with a Hold rating and $47 target at Citigroup.
• Rodman & Renshaw initiated shares of Omrix Biopharmaceuticals (NYSE: OMRI) with a Market Outperform rating.

Dow Jones & Co. (NYSE: DJ) expects to reach an agreement to sell itself to Rupert Murdoch's News Corp. (NYSE: NWS), ending a months-long soap opera that's tried the patience of media nerds like myself, according to CNBC's David Faber. No word on the final terms.

Looks like all of the chest pounding and teeth gnashing by Murdoch's many detractors, including members of the Bancroft family which owns Dow Jones, failed to stop the Australian media mogul just as I expected. The Bancrofts had no other choice. Saying "yes" to Murdoch, was much more lucrative and less potentially litigious than saying "no." There is no doubt that minority shareholders would have sued the Bancrofts for turning down Murdoch's $5 billion offer since the stock would have beeen sent into a tailspin from which it would never recover.

Worries about Murdoch are justified. You can expect the complaints about the tycoon's meddling in the Journal's editorial practices to surface in about six months to a year, perhaps sooner. It will be subtle and difficult for most readers to notice but it will happen. Though many Dow Jones journalists are cringing at the thought of working for Murdoch, they have little choice but to put up with him. Dow Jones pays well in an industry famous for paying poorly. Plus, most media companies aren't doing much hiring because of the current business conditions.

Since Dow Jones appears to have gotten a ridiculously high price for its company, Wall Street will wonder why small media companies such as the New York Times Co. (NYSE: NYT), E.W. Scripps Co. (NYSE: SSP), Martha Stewart Living Omnimedia Inc. (NYSE: MSO) and Gannett Co. (NYSE: GCI) can't do the same.

They better come up with an answer quickly.

Mergers come to sectors in waves and now its media's turn.

There are many companies that would be of interest to either public or private buyers including Gannett Co. (NYSE: GCI), E.W. Scripps Co. (NYSE: SSP) and Martha Stewart Living Omnimedia Inc. (NYSE: MSO).

Shares of Gannett, the largest newspaper publisher, have tanked more than 20% over the past five years as advertisers fled to the Internet. The company, though, has a solid management team that has made many accretive acquisitions.

Scripps has long been a favorite on Wall Street. The company's cable business, which includes the Food Network and HGTV, is great and its newspaper business is no worse off than others, which I realize is faint praise. Its shares are down 13% this year.

Martha Stewart Living, whose shares have plunged 15% this year, has defied the skeptics.

Even though the company recently said its first quarter loss widened, the results did beat Wall Street expectations. Chief Executive Susan Lyne has done a good job in expanding the Stewart brand. The recent prepared food deal with Costco Wholesale Corp. (NASDAQ: COST) seems to have potential.

Other targets include The New York Times Co. (NYSE: NYT), which I've argued before, satellite radio companies XM Satellite Radio Holdings Inc. (NYSE: XMSR) and Sirius Satellite Radio Inc. (NASDAQ: SIRI) and Belo Corp. (NYSE: BLC), which owns the Dallas Morning News along television and radio stations.