In the 1980s, a smallish newspaper chain called Gannett went on the warpath. It patched together feeds from dozens of local sources, married it with hot design and created a new national newspaper called USA Today. It was a shocker… color on the front page… graphs, boxed stories…

USA Today became, and still is, the only truly national newspaper in the United States. The New York Times and Wall Street Journal are read coast to coast, but they do very little news coverage outside their cities except for national and world news.

At the same time that Gannett was building USA Today, it began buying even more independent papers in small towns. And wherever Gannett moved in, competitors began to fall as if the mob had come around and demanded protection money. The results would have been about the same. Gannett used its huge cash pile to operate its new papers at losses long enough to drive their local competitors out of business.

In 1978, Gannett had 78 papers in the U.S. and another 21 in Canada.

Today it has 85 dailies in the U.S., more in Canada and the UK, and about 1000 non-daily newspapers altogether. A lot of success at Gannett meant a lot of failures in other places.

Now another creative destructor is doing the same unto Gannett –the Internet. Advertising revenues keep slipping as people read newspapers online. It's even worse after the housing crash because those real estate listings were an important revenue stream.

Gannett is laying off 3,000 workers. This means 3,000 people with no salaries. Not exactly good news for the economy's recovery when consumers lose incomes. But the stock market cheered. 

Meanwhile, in Boston, the venerable Christian Science Monitor announced it will cease printing its daily paper and deliver entirely online during the week.

So far this year, about 12,000 jobs have been cut in the newspaper industry.

So if you find any great newspaper stocks going for very low valuations… don't buy. Cheap ratios are not values. Cheap ratios on companies with good earnings and growth prospects are.

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