Tuesday, September 25, 2012

Gannett--Follow the Insiders

Gannett (GCI) has been an intriguing investment over the past year.  As the publisher of USA Today, the company has faced challenging conditions from the declining newspaper business, which has forced many newspapers to curtail operations or even shut down.

Gannett, however, has other assets (such as television stations) that have considerable value.  As an indication of management's confidence in the company's prospects, earlier this year the company more than doubled its dividend.  A few months ago, the stock was attractively valued at about six times earnings and a free cash flow yield of about 12%, even after paying a large dividend.

The stock has surged lately.  It had been rising steadily this summer, presumably because its tv stations would benefit from massive political advertising this year.  In addition, Warren Buffett revealed that he had increased his company's investment in the newspaper business.  Any Buffett investment still seems to have spillover effects on other companies in the same industry.

But with Gannett's stock up 33% in about a month, I think holders of the stock should follow the actions of company insiders, who have sold meaningful personal stakes in the company.

Steve Lehman

GCI:  $18.45

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