When the “smart money” starts buying an investment, it’s the most accurate buy signal that you’ll ever see.
There has been a flurry of acquisition activity in one of America’s most troubled industries. Now it’s not uncommon for companies with financial woes to find themselves on the auction block.
But it is pretty strange and uncommon when three famous billionaires ALL buy similar assets within a few weeks or months of each other. But that’s exactly what’s happening in the business of newspapers today.
When this type of thing happens, it’s worth paying attention to.
The common view today is that newspapers are a dying business. There are plenty of reasons to dislike newspapers: declining print circulation, a classifieds business that’s been crushed by CraigsList, challenges transitioning to a profitable online business model – and more.
But despite these well-known headwinds, three of the richest men in the world just entered the newspaper business in a big way. All are self-made businessmen who have built their fortunes outside of the world of journalism and the media. Yet, all three are considered among the best and most talented in their line of work.
The first is Illinois native John Henry, who made his fortune trading corn and soybean futures. His winning investment strategy helped him build a thriving hedge fund business with $2.5 billion in capital.
Henry is a sports fanatic hedge fund manager who owns the Boston Red Sox, a team that won the World Series in 2004 and 2007. He also owns the highly prized New England Sports Network television station, valued by Forbes at $600 million.
The second is Jeff Bezos, the founder of Amazon (Nasdaq: AMZN) and the most successful Internet entrepreneur ever. The former New York investment banker built his online bookstore into the biggest e-commerce company in the world, earning a $25 billion fortune along the way.
And finally there is Warren Buffett, the down to earth Omaha native who in 1962 began buying up a sizable stake in a small Rhode Island textile company called Berkshire Hathaway (NYSE: BRK-B). His investment prowess and value investment approach has led to one of the greatest investment success stories of all time. He’s now the 4th richest person in the world, with a $53 billion fortune.
Within the last week, two of the best-known east coast newspapers were sold to these iconic billionaires.
Just last weekend, Henry agreed to buy The Boston Globe from The New York Times (NYSE: NYT) in a $70 million transaction. The purchase price was far below the $1.1 billion that the Times paid for the paper in 1993, back in the glory days of print.
That transaction was followed just two days later by the sale of The Washington Post to Jeff Bezos. Amazon’s founder will personally purchase the company for $250 million.
Both Bezos and Henry are astute and proven businessmen. But the foray into the newspaper business is new for both of them. Their motives for buying newspapers are likely different.
Henry is purchasing The Boston Globe to add to his regional sports and media assets in New England. Meanwhile, The Washington Post could have synergies with Amazon and allow Bezos to revolutionize the news journalism industry from the inside.
These billionaires are signs of smart money investors entering the downtrodden newspaper business. However, it’s the actions of Warren Buffett that really indicate a bottom. And that’s because Buffett has been in the newspaper business for years, and has become especially active buying up papers recently.
In tomorrow’s issue of Income & Prosperity, I’ll tell you exactly why Buffett has been on a buying spree recently. And I’ll share an important lesson that every investor can learn from these billionaires.