When I research stocks for Australian Small Cap Investigator [current issue due out to subscribers today] and Australian Wealth Gameplan I look at many aspects of a company.
One of them is the company management.
Coming across a good or a bad management team doesn’t automatically gain it entry or exclusion as a tip, but it does have an impact.
In addition to the skills of the management team, you also need to know who and what they are. What do I mean by that?
Well, let me illustrate it this way. Are the senior guys at the top of the company the same guys that originally owned it and brought the company to the stock market?
For most blue chip companies the answer will be no.
But for many of the companies I look at in Australian Small Cap Investigator the answer is, yes.
Although it’s less common among blue chips, it does happen. Some examples include News Ltd and Rupert Murdoch, Eddie Groves with ABC Learning, and of course Ray Williams at HIH Insurance.
The problem with investing in a company that is still operated and controlled by the founder is that they can never let go. Even though they have become minority shareholders they still behave as though it is their company.
As though it is only their money on the line.
To them, shareholders are pests.
Rupert Murdoch’s ‘poison pill‘ clause a few years back that made a takeover of News Corporation virtually impossible was a classic example.
What may have been good for other shareholders was irrelevant as far as the top brass at News Corp was concerned. What was really important was making sure the Murdoch family retained a major stake in the company – about 38%.
But these days, to be honest, we’re not sure that anyone really cares about News Corp shares. In recent history they would have been a ‘must-have’ in most share portfolios. These days the stock is an also ran.
But perhaps there’s a bigger problem for News Corporation and other mainstream media outlets. It’s the reason why you should continue to give mainstream media outlets – print and TV – a wide berth. Unless you just fancy a punt.
You know, perhaps we’re witnessing the beginning of the end of the mainstream press as we have known it.
To be honest, if it is, we’re surprised it’s taken this long. We can’t remember the last time we actually bought a newspaper for ourselves. Even the copy of the Australian Financial Review that gets delivered here to the Old Hat Factory barely garners more than a ten minute read from your editor…
There’s usually nothing in it worth reading. Seriously. And their online content usually isn’t much better either.
So we were somewhat amused to read the following in yesterday’s press:
“Quality journalism is not cheap, and an industry that gives away its content is simply cannibalising its ability to produce good reporting,”
Good old Rupert, he knows how to tell ‘em.
Quality journalism eh? Good reporting. Let’s take a look at the five lead headlines on www.news.com.au from last night:
“Maddie suspect ‘looks like Posh’”
“News Corp will charge for online content”
“Car buyers still want gas guzzlers”
“Sam the koala loses battle for life”
“‘Sucking’ doll lets girl breastfeed”
He’s right, you can’t pay for that kind of journalism! Or if you did, you’d surely want your money back.
The top stories this morning aren’t any better:
“70 days for food scare to hit”
“CBD scares even Lord Mayor’s daughter” [Ed note: Don't even get us started on Robert Doyle!]
“Twitter down after ‘malicious’ cyber attack”
“Children traumatized after body shock”
“Quirky numerical nuance a moment in time”
Of course, the one that amused us the most was, “News Corp will charge for online content.”
Apparently the motivation to charge for online access is because advertising revenues have plummeted during the economic downturn.
That’s the excuse. What we guess it really means is that people aren’t using their sites anymore and advertisers have worked out they aren’t getting a big enough bang for their buck.
Which is funny, because we tipped a media/advertising company in Australian Small Cap Investigator in February and we’re sitting on a 126.03% gain.
Firms are still advertising, just less so with the mainstream press clearly.
But if the mainstream press wants to go ahead and charge for content, good luck to them. It’ll be great for free newsletters such as Money Morning and our sibling publication Daily Reckoning… and the thousands and millions of other websites, e-newsletters and blogs that provide much better content anyway – most of it for free.
Naturally, we don’t have a problem with the idea of charging for stuff on the internet. After all, we charge a low annual fee for Australian Small Cap Investigator and Australian Wealth Gameplan, and Dan Denning upstairs charges for his monthly Diggers & Drillers newsletter.
But if News Corp really think they can charge people to read stories with headlines such as:
“Climate change prompts change to prayer”
“Racy Italian mate for Knut the polar bear”, and
“Dog ‘suspected source of plague’”
… then I think they’re in for a rude shock.
The mainstream press in its current form is clearly thrashing about in its final death throes.
Other Stuff on the Markets
The S&P/ASX200 gained 1.45% yesterday. While Wall Street slipped by 24 points on the Dow Jones Industrial Average.
Meanwhile, in Europe the FTSE100 gained 43 points, and the CAC40 added 19 points.
The price of gold in Australian dollars was trading at $1,146.93, while in US Dollars it was USD$963.10.
The Aussie dollar is trading at USD$0.8398 and JPY80.14.
Crude oil dropped. It finished trading at USD$71.70.
Biggest movers on the market yesterday were…
