Wyatt Research Week in Review: May 1-7

As a former reporter and unabashed news junkie, I’ve been closely following the M&A pawing and scratching between newspaper conglomerates Gannett Co. (NYSE: GCI) and Tribune Publishing (NYSE: TPUB) over the past week.
newspaper companies As my colleague Tony Daltorio noted in Thursday morning’s issue of Daily Profit, Tribune’s board of directors rejected Gannett’s unsolicited $815 million takeover offer late Wednesday.
Gannett didn’t take kindly to the rebuff. The owner of USA Today and 107 other daily papers doubled down on its hostile overtures, noting in a formal statement that it had initiated a proxy campaign to squash Tribune’s slate of director nominees at its annual meeting on June 2.
Tribune Publishing Chairman Michael Ferro escalated the war of words Thursday.
“There’s no price,” Ferro told the Chicago Tribune (which is owned by Tribune Publishing). “We’re not for sale. We’ll always listen to everybody but we’re not for sale.”

Hard Times

The bickering between the largest and fourth-largest U.S. newspaper companies over a price tag of less than $1 billion is evidence of how far the industry has fallen.
“It may not be the oldest profession, but it’s the best,” Humphrey Bogart’s hardened newspaper editor tells a cub reporter in the underrated and seldom-seen 1952 flick “Deadline – U.S.A.”
Bogie’s ink-stained declaration is a tough sell these days, when digital ones and zeros are slowly killing traditional print operations.
According to a report from CareerCast.com which analyzed job environments, earnings potential and stress factors, the “worst job of 2016” is newspaper reporter.
The second worst? Logger.

Seeking News Partner

So if indeed Tribune Publishing is listening to “everybody,” as Ferro claims, whom does that include?
The top six U.S. newspaper publishers in terms of market share are as follows:

Gannett: 12%
Digital First Media: 8%
News Corp: 6%
Tribune Publishing: 5%
McClatchy: 5%
The New York Times: 4%

The New York Times (NYSE: NYT) is arguably the premier newspaper in the U.S. from a journalistic standpoint. It would likely have no interest in Tribune.
Ditto for News Corp (NASDAQ: NWSA), the Rupert Murdoch empire whose Dow Jones & Company owns The Wall Street Journal.
That leaves Digital First Media and McClatchy Co. (NYSE: MNI).
McClatchy is an $88 million market cap company which owns 29 daily newspapers, including The Sacramento Bee and its buzzy sisters The Fresno Bee and The Modesto Bee. As of Friday’s market close, it traded at just over a buck a share. Tribune, with a market cap just north of $350 million, could potentially buy McClatchy, though I’m not sure why it would want to.
Privately held Digital First Media, which manages MediaNews Group, owns 56 daily newspapers in 12 states. Notable holdings include The Denver Post and The Salt Lake Tribune. It’s perhaps the only other realistic suitor for Tribune Publishing.
But one of the more heartwarming news items thus far in 2016 was a report that a group of private investors agreed to purchase the holdings of New England Newspapers Inc. – including The Berkshire Eagle, the Brattleboro Reformer and the Bennington Banner – for an undisclosed sum from Digital First Media. It’s a bold move, and it might be doomed for failure, but bless their souls for trying to keep the independent spirit of local journalism alive.
In the interest of full disclosure, I should mention that The Berkshire Eagle is the hometown paper of my childhood. I grew up in Pittsfield, Mass. poring over the baseball box scores of the Eagle on muggy summer days and leaving the dining room table with elbows stained black with newsprint.
I should also mention that I’m currently a resident of Essex Junction, Vt. Gannett owns the closest daily newspaper, the Burlington Free Press.
So from my slightly biased New England perch, I don’t see any logical newspaper merger besides a contentious Gannett-Tribune marriage.
Unless Tribune Publishing is determined to go it alone and weather Eagle-like flights to independence, it may need to seek shelter under Gannett’s expanding wings.
Here are some of my favorite Wyatt Investment Research articles from the past week:
Top 5 Dividend Hikes for May – In this seemingly perpetual ultra-low interest rate environment, it’s always useful to have stocks that reward shareholders with steady dividend hikes. Marshall Hargrave has found five companies that are doing just that in May.
The Unspoken Core of Carl Icahn’s Sour Apple Outlook – “We no longer have a position in Apple,” was last week’s most quotable quote from the billionaire investor who once had a $240 price target on Apple (NASDAQ: AAPL) shares. Icahn specifically cited Apple’s slowing sales in China as the reason for his revised outlook, but there’s another big overhang for Apple.
Why David Einhorn Gave Yelp a Five-Star Review – Hedge fund billionaire David Einhorn just gave glowing marks to Yelp (NASDAQ: YELP), saying the local review company could double revenues in just three years. Yet Yelp stock is still down 44% in the last year, underperforming most of its social media and Internet peers.
A Dreamy Media Merger Is Now a Reality – With more cords being cut every day, Comcast (NASDAQ: CMCSA) took decisive action and is making a major push into animation with its $3.8 billion acquisition of DreamWorks (NASDAQ: DWA).
A 3% Dividend Yield at a Ridiculously Cheap Price – With a 3% dividend yield and a price-earnings ratio of less than 4, this railcar manufacturer is one of the cheapest dividend fares on the market.
The 3 Best Bond ETFs to Buy Now – Finding fixed-income ETFs is no problem. Picking the best bond ETFs to buy for the fixed-income portion of your portfolio is challenging right now. But Wyatt Research funds guru Kent Thune did the heavy lifting and unearthed three solid picks.
The Last 2 Triple-A Rated Companies Standing – Exxon Mobil’s (NYSE: XOM) credit downgrade by Standard & Poor’s leaves just two triple-A rated companies in the United States.
Prepare Yourself for the Remainder of 2016 With This High-Probability Strategy – The market is showing signs of bullish fatigue, with many of the S&P 500 components nearing bearish territory and the global economy showing telling cracks. But Andy Crowder has a strategy that will actually benefit from sideways-to-lower price action over the short term.
Have a great weekend!