Number of newspaper analysts dwindles

By Robert MacMillan

NEW YORK (Reuters) - Want to buy newspaper stocks? You should see an analyst. Trouble is there aren't many around anymore.

As the valuations of U.S. newspaper publishers plunge and investor interest wanes, the ranks of stock analysts who rate their performance are thinning.

In some ways, there is less need for them as the trend is clear: the U.S. newspaper business is in bad shape and getting worse as readers and advertising dollars flee to the Internet and other new forms of media.

But the void in smart thinking on the publishing sector could exacerbate an already bleak view of the business.

"The fewer analysts you have ... the less information that's distributed, the less appearance there is in the minds of institutional investors," said longtime newspaper analyst John Morton, who runs his own research firm. "And so it diminishes the industry as a whole."

Two years ago, investors could get research from more than a dozen analysts. Now, they are lucky to find half that number. Prudential cut all its sell-side analysts as it exited the research business and other firms have pruned, including Citigroup, Morgan Stanley and UBS.

Much of that stemmed from slowing revenue in slumping financial markets as well as regulatory changes that make big research departments less affordable for investment banks.

Failure to replenish these ranks could wipe out decades of intelligence, and critical thinking about the business of newspapers could well disappear over time.