Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

What the New News Corp (NWSA) Adds to Your Portfolio

Major conglomerates typically split off underperforming businesses so they can receive a sharper focus from management and also allow the remaining operations to thrive without the added burden. 21st Century Fox’s separation of its publishing operations, along with some other units, is no exception. Former News Corp shareholders holding the stock of the new News Corp (NASDAQ:NWSA) may see benefits in the long run while the two initiate their respective strategies.

How it is composed – a publishing behemoth – in the U.S., Australia, and the U.K.

News Corp (NASDAQ:NWSA)’s News and Information segment will report on its financial publications, such as The Wall Street Journal and Barron’s among others, along with the digital/online editions of these papers. These operations contribute about 80% of revenues. It also operates a Digital Real Estate, Book Publishing and Other division.

News Corp (NASDAQ:NWS)

With advertising revenues from these products trending lower 10% year over year, and circulation/subscription revenues treading water, the publishing businesses required an overhaul. As a result, the company proposed last December to split or spin off the unit in order to realize “structuring efficiencies.” Management touted the transaction as a means of continuing, and lending stability to, ongoing operations. We can surmise that the move was in lieu of an outright sale of the division. Accordingly, News Corp (NASDAQ:NWSA) can maintain the same strategy, for the most part, that it had been pursuing prior to the split.

Its strategy going forward

Management states as its number one initiative for the new operation as investing in “high quality premium content.” Chairman & CEO Rupert Murdoch has already pointed out that this is unlikely to include the buyout of further newspapers, part of the reason being because of cross-ownership and possibly “duopoly” regulations that restrict the ownership of multiple publications in one market.

It is more probable that News Corp (NASDAQ:NWSA) will target digital properties like websites, mobile applications, video-on-demand services, and online video for instance. Along those lines, it plans to monetize its existing businesses by way of such platforms.

In my view, News Corp’s best opportunity to lift the value of its publishing assets may well be to boost the subscription bases of its offerings, and this is accomplished through improvement of content as well as marketing. As an independent entity, News Corp (NASDAQ:NWSA) may be better situated to invest in the content of products such as The Wall Street Journal, while growing its subscription base digitally and through enhanced customer service. In this way, it intends to replace lost advertising revenues with recurring subscription revenues, just as numerous companies have done in transitioning to the Internet.

Importantly, too, News Corp intends to distribute dividends to shareholders. Its elevated cash flows and debt-free balance sheet ought to allow its payout to be generous, though I believe the actual amount has yet to be declared.

CBS Corp as a case in point

The closest comparison to the News Corp (NASDAQ:NWSA) split was Viacom’s 2006 spin off of CBS Corporation (NYSE:CBS). In that instance, the slower-growing broadcast television assets were separated from their parent, only to flourish in later years.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.