The Motley Fool

Warren Buffett is ditching this sector. Should ASX investors follow?

One of the hardest decisions any investor has to make is when to sell an investment. If that investment has been a success in the past, it can be even harder to cut the cord.

But sometimes, not selling an investment can be a mistake – and a costly one at that. If a company is on the wrong side of history, its profits can dry up before you can even ask ‘what happened’?

I’m sure there were a lot of people excited about Nokia stock when they looked at the world around them back in 2006 and saw how everyone had a brick in their pocket. But that was one year before the Apple iPhone was released, and one year before Nokia was consigned to the ‘has been’ bin. If one had ‘stayed the course’ with their Nokia shares, I’m sure it would still be a regret today.

Warren Buffett – one of the greatest investors of all time – has just given us an insight into where he sees the world going. According to our Foolish colleagues across the Pacific at, Buffett has just said goodbye to one of his (formerly) favourite businesses – newspapers.

That’s right, Buffett’s company Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has reportedly sold the last of its newspaper businesses for US$140 million. Buffett loves newspapers and continues to read several daily. He also used to love investing in them, but no more it seems.

It’s no secret that newspapers have been one of the biggest victims of the internet age. The days when a newspaper could command a virtual monopoly on classified advertising are long-gone. Many have struggled or shut up shop in the face of the new world of online advertising. It appears Buffett has bowed to the inevitable and jumped from the sinking ship – leaving someone else to fight over any doors left on the ocean.

What does this mean for ASX investors?

The newspaper industry has already evolved significantly over the last decade or two. Former publishing giant Fairfax media is now a part of Nine Entertainment Co Holdings Ltd (ASX: NEC).

News Corp (ASX: NWS) is still going, but is worth less than half of what it was way back in 2000.  It also owns stakes in online advertisers like REA Group Limited (ASX: REA).

Seven West Media Ltd (ASX: SWM) is also in the newspaper game with its flagship masthead The West Australian. However, this company, again, also owns a variety of other assets including (of course) Channel 7.

Of all the media groups on the ASX, I think Nine offers the best deal. Its Stan streaming service has proved very successful, as has its 9Now platform.

Foolish takeaway

All major publicly traded newspaper companies in Australia have already percolated into other media groups. Thus, you won’t really have to worry about having too much sole exposure to this struggling industry.

It’s clear where the future of media lies – and it’s not with print. If the 89-year old Buffett is reading the writing on the wall, I think everyone else should pay attention.

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short March 2020 $225 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares) and Nine Entertainment Co. Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Related Articles...

Latest posts by Sebastian Bowen (see all)