Just came across an interesting article stating the expected, the number of analysts that cover newspaper stocks is on a rapid decline:
- “The trend is clear: the U.S. newspaper business is in bad shape and getting worse as readers and advertising dollars flee to the Internet and other new forms of media. But the void in smart thinking on the publishing sector could exacerbate an already bleak view of the business.”
- Shares of McClatchy Co, publisher of the Miami Herald, are down 77 percent this year. Lee Enterprises Inc, which owns the St. Louis Post-Dispatch, is down 84 percent. USA Today publisher Gannett Co, is trading at a nearly 17-year low.
- In the absence of critical analysis from Wall Street, bloggers and industry executives have grown in importance. e.g. Outsell Inc, Reflections of a Newsosaur and Paidcontent.org
Read the full Reuters article here
Another article from Motley Fool on a similar topic, discussing the fact that financial media focus only on a handful of stocks to profile. This means investors are exposed to only a narrow range of companies which are selected as “they’re the only stocks out that can generate enough page views to support an ad-based financial media model.” More info from the article:
- Data is presented showing that small caps outperformed large caps by 6% points annually from 1927 - 2004. Many of these small-caps have no coverage so investors do not have access to quality information about them and most likely do not though they exist.
- A study found that from 1962 to 2003, stocks that could go at least a day without trading any shares outperformed stocks that traded every day by more than 8 percentage points annually.
- “Big stocks are overcovered by the media and analysts and therefore overbought by investors. And because they’re overbought, they remain overcovered. This is the self-perpetuating machine for mediocrity.”
What is the suggestion then? Find ways of getting exposure to information, research and analysis that separates you from the masses and those stocks that may be overcovered and overbought. Read the full article at Motley Fool here
As highlighted in the first article from Reuters this information can now come from unique, niche sources, including bloggers, who are experienced and in many cases seasoned market professionals that are no longer associated with any of the big investment bank research houses.
This information can complement that provided by research houses, giving you wider exposure and the opportunity to uncover sectors and niche companies you may not have been aware existed. Bloggers who are passionate about a topic usually know their stuff and make a point of being informed and 100% up to date of any developments in their interest area. Those that may not be interested or in a position to invest can use these services and this expertise for leading intelligence on the sector in which they work.
A really good place to start is Seeking Alpha which selects and aggregates content from over 400 stock market bloggers and money managers and also produces its own content and analysis. Sectors covered include Biotech, Energy, Financial, Gadgets Hardware, Software, Healthcare, Industrials, Materials.. And the list goes on. I like to read the media stocks and internet stocks sections at Seeking Alpha. Reading earnings releases and listening to an earnings conference call is an excellent way to understand what is going on in an industry. I also really enjoy the easy to read, informed commentary at Motley Fool.
It is a shame to see that the number of high quality expert analysts in the newspaper sector has dwindled because as this article highlights, “analysts help investors go beyond the general perception and provide deeper reports on factors affecting individual companies.”
But on the positive side a lot of very high quality content (generated by experienced & passionate experts) collated (with smart aggregation) is now accessible to a larger group of people, delivered online.
I think that as the newspaper stocks find their path, what the online/offline business model balance is for survival, analysts in higher numbers may be placed back on these stocks as it becomes more economic for the investment bank (people are actually interested in investing & trading in them.)
Although, the online media shift is still very early in its infancy and is showing no sign of slowing. It may be more a case of the companies themselves widening their horizons and developing their channels to warrant analyst coverage based on a diversified business and strong growth prospects rather than expecting coverage as thats the way it has always been.
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