Trade the News with Gannett Company (GCI)

Gannett Company GCI is offering an enticing opportunity for investors to literally "trade the news." The company is a media powerhouse, circulating more newspapers per day than any other company (one of them being USA Today), and it owns an array of regional newspapers, 23 TV stations and several digital media properties, including a 50% stake in Careerbuilder.com. Like most media stocks that depend heavily on advertising for revenue, GCI took a major hit when the economy began to tank. It's still trading at depressed levels at $14.88, down almost 77% since 2006. But a deeper dive into the company's balance sheet will show that this news powerhouse is a deep bargain. Its trailing P/E jumps out immediately at only 6.80, compared to an industry median of about 22 (excluding extraordinary items). That's enough to catch my interest. Its long-term PEG is reasonable at 1.12, and it's trading at only 1.76 times book (compared to 2.58 industry median) and 0.65 times sales. This is a cheap, cheap stock. Given the turmoil of this industry, however, it's no surprise to see such a low valuation. However, its balance sheet has been substantially improving over the past year. While its debt load is high, its debt to asset has improved over the past year. Operating margins, now in the top quartile of the industry at more than 17%, have improved substantially considering that it's 5-year average is -1.43%. Its return on equity is also increasing enough to catch any investor's eye — up to a whopping 31% vs. a 5-year average of -9.68%. Most of its other fundamental metrics, from current ratio to return on investment, show a company that is accumulating more assets than debt, improving its margins and starting to give a nice return to its investors. This week specifically could be an excellent time to get into Gannett. First, its 20-day simple moving average just crossed over the 50-day, which is generally a positive sign. But its 200-day is just below the 50-day and looks poised to break through with any uptick in the price — a triple moving average crossover that alone may not mean much to most investors but makes a compelling argument when combined with the fundamental information above. Once that occurs and all those technical traders start seeing GCI pop up on their screens (regardless of whether a crossover really means anything), there could be some serious buying activity. If that's not enough of a catalyst for you, the company reports earnings at the end of the month, and a positive release could send shares soaring. If you want some protection, you could do a covered call options strategy and sell the February 16's for around $0.30 per share (though you could end up getting more than that depending on the bid/ask spread when the market opens), giving you a 2% cushion on the downside before you start losing money and 7.5% possible upside. That said, that's a short-term strategy, and I think Gannett could feasibly go well north of $16 per share over a longer time frame.