As the valuations of US newspaper publishers plunge and investor interest wanes, the ranks of stock analysts who rate their performance are thinning, says a Reuters report.
Some details:
"The fewer analysts you have ... the less information that's distributed, the less appearance there is in the minds of institutional investors," said longtime newspaper analyst John Morton, who runs his own research firm. "And so it diminishes the industry as a whole."
Two years ago, investors could get research from more than a dozen analysts. Now, they are lucky to find half that number. Prudential cut all its sell-side analysts as it exited the research business and other firms have pruned, including Citigroup, Morgan Stanley and UBS.
Much of that stemmed from slowing revenue in slumping financial markets as well as regulatory changes that make big research departments less affordable for investment banks. Failure to replenish these ranks could wipe out decades of intelligence, and critical thinking about the business of newspapers could well disappear over time.
"You lose a real sense of institutional history when you lose somebody who's been through one or two cycles," said Lauren Rich Fine, a respected, 19-year analyst at Merrill Lynch who retired in 2007. "It's so unclear what's going to happen... but if I were running research, I don't think I'd need a newspaper analyst today," Fine said.
The logic behind assigning analysts is simple: their research and recommendations on company stocks encourage brokers and investors to route trades through the analyst's bank and can help form closer investment banking ties. But when trading volume drops, banks make less money and the analyst's value to the firm slips.
Shares of McClatchy Co, publisher of the Miami Herald, are down 77 percent this year; Lee Enterprises Inc, which owns the St Louis Post-Dispatch, is down 84 percent. The largest of them all, USA Today publisher Gannett Co, is trading at a nearly 17-year low.
