TAKING STOCK: The New York Times as an investment

Dear Mr. Berko:

Please give me your opinion of The New York Times. I may buy 400 shares. Also, what do you think of The Wall Street Journal?

CA, Rochester, Minn.


Dear CA:

Thanx to the internet, we’ve been watching the decline of the newspaper industry during the past dozen years.

Sadly, too many publishers have passively accepted their papers’ diminution, knowing their publications will continue to be less valued by their communities.

Certainly, there won’t be more newspapers like the 12-pound, 1,612-page Sept. 14, 1987, edition of The New York Times (NYT-$24), which caused a surge in hernia procedures at Mount Sinai and NewYork-Presbyterian hospitals.

Most publishers were unprepared for the digital revolution. Few publishers drank from the fountain of knowledge, and most others just gargled.

Using yesterday’s solutions for today’s problems, NYT’s concussed management initiated wide-scale cost-cutting measures and restructuring to strengthen margins.

That didn’t help.

Fewer readers were thumbing through the pages of the paper for daily doses of local, state and national news.

So management began to streamline and reshape its business model, divesting underperforming assets and reducing payroll and pension costs.

Resultantly, management began to generate strong growth in its formative digital advertising revenues.

NYT’s management offers mobile applications to readers who want to stay current on the go, with interactive features that complement printed articles.

The ramping up of digital platforms has generated strong results that should ensure long-term growth. Few papers can brag about having a reputation as an investigative newspaper, but the Times can. Proof of the pudding can be found in the recently awarded Pulitzer Prizes for its news coverage.

The Times has had to turn itself topsy-turvy to succeed in a very difficult operating environment. It has worked. Management has considerably improved its competitive edge during the past few years, and NYT’s share price has risen from below $10 to $26.

I subscribe to The New York Times. It’s tossed on our driveway seven days a week. It’s a delightfully written, albeit overly liberal, paper with a daily circulation of over 570,000 and about 3 million paid digital subscribers.

Though the copy editing of the Times has suffered under budget constraints and layoffs, most of its articles and columns are still competently and crisply written, while the content is apropos.

Because some of the Times’ writers are a bit extreme in their socio-political opinions, I subscribe to The Wall Street Journal (published six days a week) as an antidote.

However, the Journal has also suffered because of budget constraints, forcing good writers to leave for better pastures. Editors were laid off, making some articles yucky to read.

The Sunday edition was eliminated because the Journal’s marketing team couldn’t sell enough advertising to be able to have a print edition seven days a week. And to reduce operating costs by 10 percent, management reduced the paper’s physical size by 20 percent. In the process, some content was compromised, and so was the elegance of this paper.

The New York Times is an icon that, contrary to what President Donald Trump says, is too big to fail.

Management has added new revenue streams, improved its balance sheet and restructured its portfolio with an intense focus on generating more revenues from online activities.

Management’s recent aggressive digital marketing campaign expects digital subscriptions to reach the 5 million mark in the coming few years. And management is aggressively monetizing various superbly researched articles.

For example, its highly respected reporting regarding sexual harassment and related cover-ups, its impressive photo gallery, its interesting graphs, and its fascinating statistics are sold and transmitted to some 1,800 papers and magazines.

Other investigative articles about drug use on the gridiron and in track and field, effects of the tech expansion in California, and national politics are sold to hundreds of newspapers every day.

I believe that 2018 revenues will touch $1.75 billion and that earnings will reach 50 cents a share.

The 16-cent dividend won’t be raised this year. Numbers for the coming years are expected to improve incrementally. J.P. Morgan has a research report on NYT and is the only brokerage with a “buy” recommendation.

I wouldn’t buy NYT shares, because I think the upside potential is limited.
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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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