Gannett Co., Inc. (GCI): An Untapped Media Income Investment

News Corp (NASDAQ:NWS) posted inline results last quarter, but trimmed its full year operating income target due to softness in Fox Network’s ratings, and challenges for Sky Italia and the Australian newspapers.

The hedge fund interest in News Corp (NASDAQ:NWS), however, is quite interesting. At the end of 2012, there were 17 hedge funds with at least 5% of their 13F portfolio invested in the stock. This includes Children’s Investment Fund with 61% of its fund invested, and Seth Klarman’s Baupost Group with 11%.

The New York Times Company (NYSE:NYT) focuses on newspapers, digital businesses and investments in paper mills. The media company is shifting toward paid access for its content and lowering its dependence on advertising, which is likely to pressure revenue and EPS over the interim.

Much like the entire publishing industry, New York Times is embarking on the conversion of online readers to paid digital subscribers, and the company sold off its non-core businesses to focus on NY Times, which includes its shift toward more dependence in the digital world.

The New York Times Company (NYSE:NYT) had less hedge fund interest than either Gannett Co., Inc. (NYSE:GCI) or News Corp, with only 14 hedge funds long the stock going into 2013. Its largest hedge fund owner by market value was Kahn Brothers, with a $41 million position, accounting for 7.1% of its total 13F portfolio. Its next largest owner was billionaire Ken Griffin with a mere 0.1% of his portfolio invested in the company.

Gannett is on the “cheap’ side of the industry by P/E and P/S standards.

	Gannett	News Corp	New York Times	Meredith Corp
Forward P/E	8	16	21	14
Price to sales	0.9	2.2	0.7	1.2

	Gannett	News Corp	New York Times	Meredith Corp
EBITDA margin	21.5%	20%	13%	18.5%
Return on investment	11%	9%	12.5%	8%

Don’t be fooled