By Michael Brush, MarketWatch
Should you buy Apple’s stock because the new iPhone 6S just came out? Forget about it.
Whatever you think of Apple’s /zigman2/quotes/202934861/composite AAPL +1.45% new products, the bottom line is that without iconic innovator Steve Jobs at the helm, it will be tough for the company to roll out ground-breaking devices for years to come.
Instead, old-media companies are really the best smartphone plays right now. And I bet their shares will outperform Apple. Here’s why the seven old-media stocks I mention below will outperform Apple.
Old-media companies are finally getting up to speed in the digital era by modernizing their websites, getting into podcasts and smartphone apps, and developing online marketing skills for advertising clients.
Radio still rocks. You won’t believe this, but more people use radio than smartphones. With another big wireless carrier activating the FM chip on smartphones, more radio will be on smartphones, too.
Local TV stations own valuable spectrum that wireless providers need. And they will be selling it at auction early next year. This hidden asset makes them a smartphone play.
The stocks look dirt cheap. This is confirmed by a recent round of insider buying across the sector.
Old-media insiders have purchased $4 million worth of their own stock in the past few weeks, backing up promises to investors that their companies are far from dead.
That may not sound like a convincing amount. But keep in mind the following:
Executives at these small media companies aren’t pulling down the big bucks, but they’re buying relatively large amounts of shares. It’s also a directional shift, which matters in insider-buying analysis.
The buying totals $12 million if you include professional investors who have such a big stake they are considered insiders.
The purchases are broad-based, across seven regional companies. This kind of broad sector buying is just the kind of signal I look for to initiate sector plays in my stock letter Brush Up on Stocks .
Of course, following insiders blindly into beaten-down stocks doesn’t make sense. You have to drill down to see why they are buying. I spent a few days recently talking with money managers in this industry and digging into filings and conference calls. My take: There are many compelling reasons to follow the old-media insiders into their stocks, even though “everyone knows” old media is dead.
Here are two tips if you decide to buy old-media stocks:
. Buy a basket of them.
. Don’t overpay. Avoid prices above the trading ranges of the past few weeks. Any price spikes over the next few days will likely reverse themselves.
Here are the six biggest reasons why insiders at seven old-media companies are buying their own shares, and why you should consider doing so too:
Reason 1: Old media are finally getting new
It’s been a long time coming, but local old-media companies are finally getting on board with the Internet in a bigger way.
Some old-media companies are simply pulling out the checkbook to get into digital-friendly content. In July, E.W. Scripps Co. /zigman2/quotes/203381768/composite SSP +3.34% , a big player in local television, purchased a podcast company called Midroll Media, which produces popular shows like “StartUp” and “Nerdist.” Scripps also owns Newsy, an online video-news service, and WeatherSphere, which provides weather-related mobile apps. Robust digital revenue growth was one reason Scripps increased its operating revenue 3% in the second quarter.
Another great example is Tribune Publishing Co. , which owns a vast collection of venerable print-newspaper dinosaurs, including the Chicago Tribune, the Los Angeles Times and the Baltimore Sun.
The company recently hired Denise Warren, who managed digital efforts at The New York Times for years, and Michael Rooney, who worked at the Wall Street Journal. “They are taking their tool kits and heading over there,” says Christopher Towle, co-manager of the Towle Deep Value Fund /zigman2/quotes/208819154/realtime TDVFX +0.30% , which has outperformed competing funds by 4.6 percentage points annualized over the past three years, according to Morningstar.
The recent hires are one reason the fund holds shares of Tribune Publishing. Tribune’s Warren said in the most recent conference call she’ll finish surveying the landscape by the end of the year, and implement a digital plan right after that.
Elsewhere, old-media companies are taking a different swing at the online revenue piñata: They’re developing internal-ad agencies offering digital-marketing services. A.H. Belo Corp. /zigman2/quotes/200862142/composite AHC -1.83% , which publishes the Dallas Morning News, last January bought DMV Digital Holdings. Its Speakeasy and 508 Digital divisions also help local companies market online.
Similarly, at the local newspaper conglomerate New Media Investment Group Inc. , a unit called Propel Marketing helps print-ad partners develop digital-marketing plans. Propel’s revenue is growing rapidly (76% year over year), albeit off a very small base. CEO Michael Reed is unabashed. “We believe the business is positioned to become a major part of New Media’s future organic growth,” he says.