TPS Position Update – July 12, 2016
. . . . MCCLATCHY CO. (MNI) – HOLD
We recommended the stock last August at $0.96. Earlier this year, the stock went through a reverse 10-1 split. Today, it closed at $17.26.
That’s an 80% return.
The last few months have been good. As recently as May, the stock traded at $10.30.
Following the announcement of the reverse split in early June, McClatchy went on a tear. There has been no material change in the fundamentals of the company. For the most recent quarter, ending March 27, 2016, the firm reported an operating loss of $6 million.
Advertising revenues fell 9.9% year over year. Digital-only ad revenues were up 18%.
Second quarter earnings are scheduled to be released July 21st. We expect a middle of the road report, with ups and downs that reflect improvements on the digital side of the house and continuing challenges with traditional print newspapers.
We are holding McClatchy because we believe the share price will continue to climb as a result of improving operations. We do not expect a dramatic turnaround in print only revenues, but by the same token, we do not anticipate accelerated losses.
The transition to a digitally-driven business is difficult for any legacy media organization. There is much work to be done at McClatchy, and we want to be around to share the profits.
The firm runs media companies in 28 U.S. markets. Its best-known newspapers include The Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The (Raleigh) News and Observer, and the (Fort Worth) Star-Telegram.
. . . . NEVADA GOLD (UWN) – HOLD
We recommended Nevada Gold at $1.66 in June 2015. Today, the stock closed at $1.95.
Since we last checked in on the gaming company, the firm has sold some property in Colorado that it has been sitting on for 20 years, and has been trying to sell for nine years.
Unfortunately, the 260 acre parcel was sold at a loss for $750,000. The company will record a $350,000 non-cash impairment loss in Q4 of fiscal 2016.
This loss will offset taxable income, an undesirable asset is off the books, and the proceeds can be applied to paying down debt.
For the past few months, the stock price has been slipping. We expect this trend to reverse itself. Nevada Gold is well-managed, charting a solid growth plan, and strengthening its balance sheet. Quarterly revenues are climbing, and as debt is paid down, interest expense declines and margins grow, we anticipate solid, long-term performance.
Action To Take
- HOLD MCCLATCHY CO. (MNI)
- HOLD NEVADA GOLD (UWN)
Category: TPS Update
