Gurus Give Newspapers a Good Read

In the late 1990s, conventional wisdom had dot-com companies poised to do away with all sorts of established businesses, from "bricks and mortar" stores to stockbrokers.

Of course, it hasn't quite worked out that way, and that is why the dot-com bubble burst. But some mainstream businesses have been profoundly hurt by the Internet, such as travel agents and the music recording and retailing industry.

Newspaper and magazine publishers also are taking a hit from the Web. Print publications are losing both subscribers and advertisers to the Internet. However, these companies generally remain profitable. They have not yet been closing like travel agencies and record stores.

But no knowledgeable investor is looking at the publishing industry as a growth vehicle. Right now, it seems threatened by everything from free advertising sites such as Craigslist to free news sources such as -- well, the Web sites of these very same newspapers and magazines -- and to new news sources, such as blogs and YouTube.

The dark clouds hanging over the publishing industry made recent developments all the more surprising. Specifically, the Tribune Company (TRB - commentary - Cramer's Take), owner of The Los Angeles Times, The Chicago Tribune, Newsday, and other newspapers, along with the Chicago Cubs and several television stations, was put on the block last fall. Real estate mogul Sam Zell has emerged as the wining bidder for the company, as just about every newspaper reader (remember those folks?) and news junkie knows.

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The question on the minds of many is why Zell or anyone else (and several others were interested in buying Tribune) would want to get involved in the publishing industry at this time, given the struggles it faces. There may be a method to Zell's and the others' madness. Not all of these companies are dogs. They make money, still attract hundreds of thousands of paid subscribers, are liked by many advertisers and, at least by the lights of the guru strategies I follow, are potentially headline-making investments.

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At the time of publication, Reese had no positions in any of the stocks mentioned in this column, although holdings can change at any time.

John P. Reese is founder and CEO of Validea.com, an investment research firm, and Validea Capital Management, an asset management firm serving affluent investors and companies. He is also co-author of the best-selling book, The Market Gurus: Stock Investing Strategies You Can Use From Wall Street's Best. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Reese appreciates your feedback. Click here to send him an email.

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