When Warren Buffett dedicates three pages of his annual
shareholder letter to the troubled business of newspapers, it's
worth paying attention.
In his May 2013 letter, Buffett said that
Berkshire Hathaway (NYSE: BRK-B)
had been on a newspaper-buying spree. The company's subsidiary -
BH Media Group - purchased 28 daily newspapers at a cost of $344
million in just the last 15 months. Since then, the company has
bought additional papers in Atlantic City and Roanoke.
These acquisitions quietly made Berkshire one of the biggest
newspaper publishers in the country, with daily circulation of
nearly one million.
Now, Buffett isn't new to the newspaper business.
For the past 35 years, Berkshire Hathaway has completely owned
The Buffalo News
. And he's seen the ups and downs in the newspaper business as
the paper battled for control of the Buffalo news market.
But that's not his only long-term newspaper investment. Back
in 1974, Buffett bought an 11% stake in The Washington Post for
$11 million. The stock market had just fallen 50%, and stocks
were cheap. So Buffett bought a big stake in the Post at a deep
He also advised the Graham family to buy back shares of
The Washington Post (
when the stock was cheap. And that increased the size of
Berkshire's ownership to 23%. Even today with shares of the Post
trading 40% below their all-time high, Berkshire's $11 million
investment is today valued at just over $1 billion - that's a
I think its fair to say that over the last 40 years, Buffett
has developed a great understanding of newspaper economics. So
what does Buffett say about the newspaper business today?
From his latest letter to shareholders:
"Newspapers continue to reign supreme in the delivery of
local news. Charlie and I believe that papers delivering
comprehensive and reliable information to tightly bound
communities and having a sensible Internet strategy will remain
viable for a long time.
Berkshire's cash earnings from its papers will almost
certainly trend downward over time. Even a sensible Internet
strategy will not be able to prevent modest erosion. At our
cost, however, I believe these papers will meet or exceed our
economic test for acquisitions. Results to date support that
Warren Buffett, 2012 Berkshire Shareholder Letter (May 1,
After my article yesterday -
What Surprising Sector the "Smart Money" is
- you might be skeptical of the future for newspapers. After all,
the purchase of The Washington Post by Bezos or
The Boston Globe
by Red Sox owner John Henry may simply be ego-driven investment
But unlike Bezos and Henry, Buffett hasn't been purchasing big
name papers. Instead, he's been buying small town daily and
weekly newspapers serving local news to a local market…paper
The Charlottesville Daily Progress
The Richmond Times-Dispatch
The Winston-Salem Journal
Now, these aren't exactly high profile or prized
It says a lot that the world's best performing value investor
wants to own newspapers - and he's buying them whenever they are
When companies like
Media General (
are in a hurry to sell of their newspapers, this is a great time
for an opportunistic buyer like Berkshire to step in.
That's exactly what happened in 2012 when Buffett bought 63 daily
and weekly papers from Media General.
Investors like Warren Buffett are successful
they are value focused. In other words, they buy assets
when they are attractively priced. As Buffett's teacher Ben
Graham said, "
Price is what you pay. Value is what you get.
In spite of the newspaper industry facing some strong
headwinds, Buffett sees it as an attractive business. That's
because at a deeply discounted price, even troubled newspapers
are a good value.
If you believe that the newspaper industry will recover and
find a way to profitably publish in print and online, you might
want to invest in the sector. I wouldn't hesitate investing
in Berkshire, but the newspapers are a tiny portion of this huge
The better ways to invest would be directly in
, with 82 daily papers including
. The company with a $6 billion market cap has a diverse group of
print, digital and marketing assets that give investors direct
exposure to the newspaper business.
P.S. What do you think of the newspaper business? Are
papers here to stay, or dying soon? Send me your views on
the industry and the transition from print to digital. My