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UPCOMING CHAT: Join Michael Sivy for a live chat on AOL's Market Talk on Tuesday, May 1 at 1:00pm ET. Bring your investing questions as Michael identifies sectors and stocks that possess true value in a rocky market. AOL keyword: MarketTalk Can't make it or not an AOL subscriber? Read the transcript on Wednesday at http://www.money.com/chat/ *************************** SIVY ON STOCKS from money.com April 30, 2001 Printing profits Gannett is best known for publishing USA Today. But the company's local papers and broadcasting properties make it the perfect play on a comeback in advertising. By Michael Sivy It's too soon to say that the economic slump is over. But it's not too soon to say that it will be over before long. Friday's surprising report on the economy showed growth continuing at an annual rate of 2 percent, up from a low of 1 percent in the fourth quarter of 2000. And while the growth rate could dip again, the Federal Reserve's most recent interest rate cut pretty much ensures that the economy will be expanding solidly next year. To play the potential rebound, most investors have focused on the tech sector. I too think there are some good tech buys, but the outlook for many technology issues is complicated by a host of factors, from overcapacity in the telecommunications industry to the number of bad loans held by lenders. The simpler way to bet on a potential rebound is with the shares of consumer and basic manufacturing companies. Chief among these businesses are those that depend on advertising. The collapse of the free-spending dot-coms at the same time that the broad economy was turning down created an advertising climate that has been little short of disastrous. And even a moderate economic comeback could provide a huge lift to those media companies that depend most on advertising. Gannett [GCI], best known for publishing USA Today, is a perfect example. Although the heavily formatted broadsheet has been derided as "McPaper," the journalistic equivalent of fast food, USA Today has a lot to be proud of. At 2.3 million, it has the largest circulation of any U.S. daily. The paper pioneered the use of colorful graphics and squeezes a lot of news in a compact layout. I usually look at USA Today's business section first every day, before I turn to the Wall Street Journal or the New York Times. But Gannett's real upside lies in its other less-conspicuous properties. The company runs nearly 100 local papers, which are often near-monopoly outlets in midsize suburban markets. In addition, Gannett has 22 television stations in 19 markets, scads of non-daily publications and websites, and 15 daily newspapers in the United Kingdom. Altogether, the company is virtually an index fund for advertising spending. In 2000, Gannett reported record earnings growth of 15 percent. In the fourth quarter, the gain was only 11 percent because advertising trends had already begun to weaken. That downtrend has continued, and for the first quarter of 2001, profits were actually down 14 percent. The next few quarters will be tough, but by 2002 earnings should be rising again -- and media stocks typically discount trends in ad spending as much as a year in advance. Gannett's stock hit bottom in September at $49 a share, and has been rallying since then despite weakening earnings. Longer term, the shares of this well-managed company look quite attractive. Earnings figure to grow at a compound annual rate of about 13 percent over the next five years. And at a current price of $64.55, the shares trade at less than 18 times estimated earnings for the current year. That sounds like a great format for capital gains. ### Post your comments on Michael's column at: http://www.money.com/depts/investing/sivy/index.html To subscribe or unsubscribe to Sivy on Stocks, go to: http://www.money.com/email/ ----------------------------------------------------------- MARKETPLACE ----------------------------------------------------------- CONTACT THE BIGGEST COMPANIES IN THE WORLD! Over 5,000 contact names in the OFFICIAL FORTUNE Databases. DOWNLOAD THEM NOW! http://www.fortune.com/datastore/?mn1 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Special Internet Offer!!! Sign up for a RISK-FREE issue of MONEY MAGAZINE at http://www.money.com/subscribe2 Or if you prefer call our toll-free number 1-800-544-4594 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * We may, from time to time, contact you with offers for Time Inc. products and services which we think may be of interest to you. 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