Making money out of publishing? A portfolio approach
Last week (‘Making money out of publishing’, 1st August) I suggested that, if one believes that large multinationals in publishing are cash cows, the rational thing would be to invest in them. My own company, The Professional and Higher Partnership, is the opposite of a large multinational: we are very much a micro-enterprise (proudly so!). But we have been retaining some of our operating profit with a view to acquiring the rights of publishing assets. Unfortunately, we have found a dearth of suitable acquisition targets. We have, therefore, recently taken instead to building up an investment portfolio.
I stress we’re not quite in the Warren Buffett league (micro enterprises tend to generate micro profits). Nevertheless, investment in equity does mean that, despite our size, we stand to gain from whatever profits Big Publishing manages to produce – though I should say that analysis of their annual reports indicates that supposed super-profits on their part are largely mythical.
A frustration is that it isn’t all that easy to build a balanced portfolio. Several sectors of the publishing and information industry are difficult to access, especially in some of the business-to-business areas. There many good companies are privately held: Ingram, for example.
Some conglomerates are traded publicly – Informa, Pearson, Reed Elsevier, and Thomson Reuters, for example. Other large publishers aren’t – notably Sage Publications and Wiley Blackwell. One can gain exposure to retail, most obviously through Amazon.
Other sectors that can be accessed one way or another include backroom (and content delivery) systems (Publishing Technology), book packaging (Quarto), printing, wholesaling and supply (Smiths News), and independent publishing (e.g. Quercus and Bloomsbury).
Overall, though, the industry presents limited opportunity. And it’s no means clear to me that all the stocks that are available are desirable. We’re not rushing to invest in Barnes & Noble, or even WH Smith.
Potentially share ownership offers the potential to leverage larger companies’ market share. Nonetheless, it remains a case of caveat emptor!