A couple of years ago (‘Making money out of publishing?’, September 2013) I posted about developing a portfolio of shares in publishing and allied industries. I noted then 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. Many good companies are privately held’.
Since then we’ve been gradually researching the markets and, as a result, have developed a portfolio model. It consists of three concentric circles:
- at the centre are pure book publishing plays. (An example of a quoted company of this type is Bloomsbury.);
- in the second circle are other forms of publishing, comprising (a) conglomerates (which frequently include broader information-based activities, including media and event management), (b) electronic publishing and (c) magazine publishers. (Examples of quoted companies of these types include, respectively, Informa, Electric Word, and Johnston Press);
- in the outer circle come allied activities, including paper and packaging, back office systems, printing (yes, there’s still some left), distribution, retail, and intellectual property. Examples include, respectively, Cropper, Publishing Technology, Connect, Amazon, and IP Group.
So, with a little lateral thinking, it’s possible to identify a reasonably broad, balanced, range of candidates.
The difficulty then is that by no means all the candidates are desirable. There is, in my view, a particular problem with the central circle. If I were to invest with my heart (the royal road to ruin), I’d be buying up shares in companies such as (to give UK examples) Bloomsbury, Haynes, and Quarto. But my head says, ‘How are they going to grow their profits?’ I read the reports. The figures don’t set the pulse racing. Neither, frankly, does the blah.
As a consequence, I sit on my hands.