Cheery news from overseas

Sometimes you have to go overseas to get any good news. It may be good news or not, but the Manchester Guardian website suggests:

Cheap US newspaper stocks may reward the patient

The article says in part:

U.S. newspapers promise misery for investors this year as advertising sales erode and a possible recession looms, but steady cashflow and cheap shares may reward shareholders who grit their teeth and ride it out.

The perception on and off Wall Street is that the newspaper business is in big trouble as readers flee to the Internet, and things will only get worse this year as the real estate and financial industries slash spending on ads.

While these trends are real, some investors are holding -- and even increasing -- their stakes in newspaper publishers, attracted by low valuations after stock prices have fallen by as much as 70 percent over the past 12 months.

Thomas Russo, partner at Gardner, Russo & Gardner, keeps a small position in McClatchy Co, The Washington Post and EW Scripps Co, saying shares are reasonably priced and opportunities abound for newspapers to cut costs.

McClatchy has "substantial flexibility left to reduce operating spending," Russo said, pointing to shaving the width off newspapers, cutting staff from the 2006 purchase of Knight Ridder Inc, and relying on more user-generated content -- writing, audio and video that they do not have to pay for.

Another investor, Private Management Group, raised its stake in Journal Register Co to more than 9 percent from 6 percent, according to a filing with U.S. securities regulators this week.

"We look at these stocks and say, if we didn't own them, we would buy them here, and that is because we think they are just ridiculously cheap," said another investor, who declined to be identified. "If you have something that's trading at six times its cashflow, you can get your money back real fast."

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