What's an ailing newspaper chain worth? We may soon find out.
Word is that Knight Ridder
Everyone's being as hush-hush as possible about the big deal, but the reports are that newsie Gannett
And that's the whole problem with these shares. Like my colleague (and fellow invest-where-the-Street-ain't cheapskate) Stephen Simpson, I never found Knight Ridder shares to be particularly attractive, at least not after the whole "strategic alternatives" thing popped the shares out of panic-cheap range. Looking at Knight Ridder's recent results, applying a reasonable discount rate, and projecting a conservative growth rate, $65 a share looks at least 10% too generous to me.
But then, almost every newspaper I check in with (and I do this pretty often) looks overpriced. I see similarly overpriced shares at McClatchy and Tribune Company
Newspapers aren't dead, but neither are they weathering the information and advertising revolution very well. While consumers expect to get their news for free, they direct more and more of their ad dollars to Internet advertising. That means we've probably got a long, cold season ahead for traditional media firms. That doesn't mean don't buy, but it does mean be extra careful. The lesson here is one for the ages. Buy the behemoth slowpokes only when they're priced for the dirtnap. Otherwise, look elsewhere.
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Seth Jayson worked at newspapers for years, so he knows the score. At the time of publication, he had no positions in any company mentioned here. View his stock holdings and Fool profile here. Fool rules are here.