Newsprint forestry stocks and newspapers

I have been tracking Abitibi (NYSE: ABY; TSX: A) for a while now. Canadian forestry stocks, newsprint in this case, have been struggling mightily for years. It's totally out of favour but risks are high. There seems to be no end in sight for the newsprint consumption decline.

In fact, I'm going to wait and see given that the newspaper industry is still posting some horrible numbers. Newspapers are facing their worst crisis since The Great Depression and it's not clear that circulation decline will end any time soon. With the housing decline, real estate ads, a big chunk of their ad income, are falling. As long as circulation keeps declining, I think the newsprint forestry stocks will face difficulties.

I haven't looked deeply at the newspaper companies but that's another contrarian area. The fortunes of the newspapers and the newsprint industry will rise and fall together. One reason I don't like the newspaper industry is because their valuations are still high. New York Times (earnings July 25th), The Toronto Star (Canadian), and others, still sport P/Es above 20 and price/bookvalue of 2+ in some cases.

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