Sure, the Daily Journal Corp. can still turn a small profit selling advertising and subscriptions for its legal trade newspapers, magazines and websites. But it’s getting even better results from investments under the guidance of Warren Buffett’s right-hand man.
For the six months ended March 31, Daily Journal reported net income of $3.75 million but also had unrealized gains of $16.8 million from a portfolio of stocks, bonds and treasury bills overseen by the company’s chairman, billionaire investor Charles Munger.
The downtown L.A. media company’s thinly traded stock got a boost after the company reported the results May 11 and finished the week up 11 percent, making it one of the biggest gainers on the LABJ stock index. (See page 56.)
“Somebody knows what they’re doing in terms of their investments,” said Lloyd Greif, chief executive at downtown L.A. investment bank Greif & Co.
Indeed, value investor Munger, who owns about 9 percent of Daily Journal shares, has guided the company’s board in making investment decisions alongside Vice Chairman J.P. Guerin, as stated in the company’s quarterly report.
Near the trough of the market in February 2009, Daily Journal moved some of its cash and treasury bills into the stock of two Fortune 200 companies and the bonds of a third. The portfolio has since added the stock of two foreign manufacturing companies and one more Fortune 200 firm.
The securities, purchased for $45.2 million, had a market value of $97.7 million March 31. Along with the company’s more than $6 million in cash and treasuries, the holdings make up more than 90 percent of the company’s $117 million market cap. (The value of the investments may have fallen since March 31.)
Meanwhile, Daily Journal’s main businesses are valued at just two times last year’s profit of $7.8 million.
Net income for the six months ended March 31 dropped 7 percent compared with the same period last year, due in part to a large decline in foreclosure notice advertising in its smaller papers. Much of the company’s revenue has come from foreclosure notices posted in regional papers. Those include Record Reporter in Phoenix and Daily Recorder in Sacramento, two areas hit hard by the housing crisis.
The company’s largest local paper is the Los Angeles Daily Journal.
Company officials declined to comment for the story.
In the earnings report, the company projected future challenges in its print advertising business.
Still, Greif said the Daily Journal’s bounty of cash and other investments under Munger’s chairmanship is a sizable safety net for the company.
“When somebody buys this, they’re taking what they perceive to be a low risk on the underlying business,” he said.
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