Restart the Presses: Newspapers Not Dead

There's an old saying among the chattering classes: Freedom of the press is guaranteed only to those who own one. But for at least the last year and a half, the question has been: Who would want to?

Over the past three months, though, a strong rally in newspaper stocks suggests that there might be life yet in a business long pronounced dead by many investors and pundits.

Everyone knows the story line: The Internet plus Google plus the financial crisis plus the recession equaled a host of presses either on the brink of bankruptcy or fully in it. Investors fled newspaper stocks to such a degree that, at one point, a share of McClatchy(MNI Quote) cost less than the cover price of one of its dailies (the Fresno Bee, for example).

The death of another industry was being mourned; the obits writers were filing their copy.

And then came this summer. In their second-quarter earnings conference calls, executives at several companies -- USA Today publisher Gannett(GCI Quote), the New York Times(NYT Quote) and McClatchy chief among them -- hinted that the worst had arrived and, along with it, a bottom to the most vicious ad recession in the history of newspapering.

All those layoffs -- more than 30,000 industrywide since mid-2007, according to some estimates -- and all that cost-cutting produced earnings that surprised just about everyone.

Meanwhile, the Fed chimed in to say the recession was "likely over." Momentum traders sought out beaten-down cyclical stocks as improving economic-data trickled in. Stocks rose, credit markets thawed, and debt-ridden newspaper companies were able to refinance. Stocks went higher still. Shorts got squeezed.

The result? Times shares up 74% since July. A.H. Belo(AHC Quote) up 255%. Gannett 290%, Journal Communications(JRN Quote) 326%, Lee Enterprises(LEE Quote) 470%, McClatchy 555%.