Sunday, April 02, 2006

Gannett Corp; GCI April 2, 2006

A few weeks ago, I did a simple analysis on Gannett Corp based on Knight Ridder selling price to McClatchy, and concluded that Gannett is undervalued and has potential to rise up to 27% or more. At the time of analysis, Gannett was selling at $61.26 per share. Since then, its share has slided down to current price of $59.92 per share.

I would like to reiterate that Gannett is a good buy at current price. As expected, a few superinvestors, who are tracked by GuruFocus, started to invest in this wonderful company. Among these superinvestors are Arnold Van Den Berg (3.64% of Assets), Bruce Sherman (3.46% of Assets), Bill Nygren (1.6% of Assets), Robert Olstein (1.28% of Assets), Warren Buffett (0.49% of Assets), and others.

Good management is critical for improving shareholders' return. It is extremely hard to avoid paying excessively for acquisition. Gannett Corp has once again proved that it has superb management by avoiding purchase of Knight Ridder. Selling at 22X Enterprise Value/Normalised Free Cash Flow was overpriced.

Rather than buying Knight Ridder, Gannett could invest in itself, which it has proudly been doing over the last two years. Gannett has been repurchasing its own shares aggressively over the last two years; using more than its net income for year 2005 and 2004.

Good company, coupled with good management, selling at reasonable price is a great strategy to beat the S&P500 return.

If you have any comments or insights to share, please send me an email. Remember, sharing is the best way to learn.

All the best,
Dah Hui Lau (David)

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