Power Rating Stock Spotlight: The Washington Post

The once mighty newspaper business has been hit hard by the popular and hugely effective instant information transmission system known as the Internet.  No longer do consumers need to wait for newspapers to be published to read the news.  The news cycle is now a 24 hour a day/7 day a week maelstrom of information.  I would never intuitively expect a newspaper company to potentially be a good long term investment in this day and age, however, this week's Stock Spotlight, The Washington Post Company (WPO@WPO | Quote | Chart | News | PowerRating) has me looking in that direction for a variety of reasons.

The Long Term Power Rating site has a section that rates the individual stock holdings of famous investors and funds.  I took a look at Warren Buffet's portfolio and saw the 7 Long Term Power Rated newspaper company as one of his holdings.  This is what first perked my interest in The Washington Post. Long Term  Power Ratings are a numerical ranking system for stocks.  The system is built on 12 years of statistically relevant and proven studies across most market conditions. 

Top rated stocks have proven to have a greater likelihood of closing higher one year in the future than the low rated stocks.  The higher the rating, the greater the percentage chance of a higher close one year later.  On the other hand, low ranked stocks on the 1 to 10 scale have proven time and time again to simply be too volatile, thus risky for prudent long term conservative investment.  Let's take a closer look at The Washington Post Company.

The newspaper was founded in 1870 by Stilson Hutchins and had such journalism luminaries as Theodore Roosevelt and Joseph Pulitizer contribute articles in the early years.  The company went bankrupt in 1933 on the heals of the Great Depression and was sold to the highest bidder in an auction.  In 1948, the company expanded into the radio then the TV business soon after, going public in 1971. Since that time, The Washington Post has grown into a media empire by purchasing media/educational properties and launching magazines.  They purchased the popular online magazine, Slate, from Microsoft in 2005. 

The company has posted a series of losses this year across the normal financial metrics.  However, on September 11, 2008 they declared the regular quarterly dividend of $2.15/share.  Revenues were up 6% over the same quarter last year due to growth in cable TV holdings and educational divisions, namely Kaplan. 

Technically, the stock appears to have bottomed here and is testing support in the $570/share range.  Despite the negative environment for print media, WPO is an innovative and creative company that deserves a closer look from long term investors.

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David Goodboy is Vice President of Marketing for a New York City based multi-strategy fund.