Winners & Losers: Newspapers Stocks Surge

NEW YORK (TheStreet) -- Pure-play newspaper stocks rallied sharply Monday -- turning in as strong a day as perhaps they'd seen in years -- following last week's run of quarterly reports that surprised many who had been expecting worse.

The New York Times(NYT Quote) was the last to report, on Thursday, coming on the heels of USA Today publisher Gannett and the community-newspaper chains McClatchy(MNI Quote) and Journal Communications(JRN Quote). All the companies managed expectations well, beating Wall Street's targets, but revenue nevertheless continued to decline, with 30% drops in advertising sales being the norm.

Of course, shares of these companies, many of them teetering on the edge of insolvency, are so beaten-down that any bidding action will prove buoyant.

Furthermore, all of the stocks had heavy short interest. The pop received from the quarterly results may have caused, therefore, a short squeeze.

As of June 25, for example, the Times had a huge short ratio of 19.2. Anything over five is considered a bearish signal. Gannett shares, by comparison, had a short ratio of 8.9, nowhere near the Times but nonetheless substantial.

Times shares led the sector higher, closing Monday's session up $1.07, up 16%, to $7.73, on volume of 2.4 million shares, nearly twice the daily average turnover.

Gannett added 72 cents, or 12.4%, to $6.52, also on heavier-than-average volume; McClatchy gained 22 cents, or 18.8%, to $1.39; EW Scripps(SSP Quote) rose 24 cents, or about 7%, to $3.70; and Journal Communications added 20 cents, or 9.4%, to $2.34.