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PHILADELPHIA - The newspaper industry's largest shareholder has trimmed its bets.
Investments in nine national newspaper chains by Private Capital Management, a Legg Mason Inc. subsidiary based in Naples, Fla., have dropped from 16 percent of the company's portfolio in late 2004 and early 2005 to 13.8 percent as of Dec. 31, according to PCM's quarterly filing with the Securities and Exchange Commission earlier this week.
PCM reduced its investment in Knight Ridder Inc. from 12.9 million shares as of Sept. 30 to 12.4 million shares as of Dec. 31, according to its quarterly report. It was the second straight quarter in which PCM's Knight Ridder holdings dropped.
In previous filings, PCM attributed some of the Knight Ridder sales to requests by clients to cash in their shares, and not to a change in chief executive officer's Bruce Sherman's investment strategy. Sherman has asked investors to be patient with newspaper stocks, which dropped last year as publishers faced higher newsprint costs and sluggish advertising sales.
In November, PCM disclosed that it had pressed San Jose, Calif.-based Knight Ridder Inc. to seek a buyer in an effort to boost its share price. Knight Ridder publishes 32 dailies, along with Web sites and other publications.
Other Knight Ridder investors, including Parnassus Investments, of San Francisco, and Wachovia Corp., of Charlotte, N.C., also sold Knight Ridder holdings in the fourth quarter. The company has attracted other investors, including Highfields Capital Management L.P., of Boston, which bought 3.3 percent of Knight Ridder during the fourth quarter, and Franklin Mutual Advisers LLC, of Short Hills, N.J., which bought 1.3 percent of the company, according to SEC filings.
Also in the fourth quarter, PCM reduced its Gannett Co. holdings to 15.9 million shares from 16.7 million; New York Times Co. to 20.7 million shares from 21.7 million; and Journal Register Co. to 4.1 million from 4.9 million. The investment firm also cut its stakes in Belo Corp., Lee Enterprises, McClatchy Co., Media General Inc. and Tribune Co.
During the fourth quarter, overall Private Capital assets fell to $27.9 billion from $29.9 billion three months earlier. A spokesman for the firm said he could not comment.
Some investment firms typically sell shares in the fourth quarter to help clients cover taxes or rebalance portfolios when stock prices drop. But PCM's reduction in newspaper stocks outpaced the overall shrinkage of its investment portfolio, and contrasted with its record in the fourth quarter of 2004, when it boosted holdings in Gannett, Knight Ridder and other newspaper owners.
In a fourth-quarter letter to clients, Sherman and PCM President Gregg J. Powers defended their heavy investment in newspapers despite the stocks' weak performance recently. They called reports of the challenges facing newspapers "grossly overstated," and wrote that, by migrating their content from print to the Internet, newspapers will be able "not just to survive, but eventually to resume robust growth."
In July, Sherman met with the Knight Ridder board and pressed the company to sell itself to a high bidder who could boost profit. In November, the firm went public with its demands, and Knight Ridder responded by putting the company up for sale. Bids are expected in the next several weeks.
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(c) 2006, The Philadelphia Inquirer. Distributed by Knight Ridder/Tribune News Service.
