Washington Post's (NYSE: WPO) shares have recently been trading for close to $430 per share. Sounds steep -- until you realize the stock is down from nearly $1,000 at the end of 2004. It's easy to assume that its place within the newspaper industry means the company is doomed … but in this case, the publisher has a secret weapon on its side.

Before we reveal it, let's review just how unattractive newspaper-related companies have gotten these days:

Company

5-Year Avg. Ann. Return

5-Year Avg. Revenue Growth

Over the Past Year

Washington Post

(11.5%)

6.4%

Washington Post weekday circulation dropped 13%

New York Times (NYSE: NYT)

(19.1%)

(5.9%)

New York Times weekday circulation down 9%

Gannett (NYSE: GCI)

(24.4%)

(5.7%)

USA Today circulation dropped 14%

News Corp. (Nasdaq: NWSA)

(3.7%)

6.7%

Wall Street Journal circulation up 1% (but excluding online subscriptions, circulation was down a smidge)

Data: Yahoo! Finance, Motley Fool CAPS.

Newspapers have been losing ground to other media, and their prognosis is grim. Even Warren Buffett, speaking during his annual shareholders' weekend in 2009, noted, "For most newspapers in the United States, we would not buy them at any price. ... They have the possibility of going to just unending losses."

The Post's big advantage
But Washington Post is more diversified than you may think. Beyond newsprint, it owns many pulp-free or pulp-light businesses, such as the Kaplan education company, Cable ONE, several television stations, websites such as Slate.com, and Newsweek magazine, among other things. Not all are financial powerhouses -- the company currently wants to sell Newsweek -- but Kaplan is.

While revenue for the company overall in 2009 rose 2% over 2008, the education segment revenue, which includes Kaplan, was up 13%, composing 58% of the company's total take. That's right -- at the moment, Washington Post is primarily an education company.

And education, particularly online learning, is a booming business these days. Apollo Group's (Nasdaq: APOL) five-year revenue growth has averaged 15%, as its University of Phoenix has become the nation's second-largest university. Its online focus is light on capital, helping it maintain relatively steep profit margins above 10%. Kaplan has similar advantages.

Many media companies are diversified, but few these days have fast-growing divisions that generate more than half their revenue. The more focused on old-fashioned newspapers a company is, the more cautious you should be about it as an investment. In general, the newspaper business isn't definitely hopeless, but there are more promising investments. The Washington Post company may be one of them -- thanks to Kaplan, a lower-than-its-historical average P/E, and a 2.1% dividend yield.

Sound off in the comment section below, and let me know what you think about the future of Washington Post!

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