Warren Buffett doubles his stake in Lee Enterprises

The St. Louis Post-Dispatch reports good news for Lee Enterprises’ valuation. Warren Buffett now owns about 6% of shares outstanding.

Lee’s shares jumped nearly 20 percent on the news Wednesday, closing at $1.59, up 26 cents.

Lee Enterprises, Inc., headquartered in Davenport, Iowa, owns over 50 newspapers including the Wisconsin State Journal.

LEE stock is way down from $45/share in 2005. However, the Post-Dispatch article includes this as a partial explanation of why Buffett might be buying now:

 …newspapers still turn out operating profits equaling 10 percent or more of revenues, notes long time newspaper industry analyst John Morton. “There are industries that never expect 10 percent margins in the best of times, and newspapers are doing it in their worse times,” he said.

That combination of low stock prices and respectable margins are what attracts Buffett, says Morton. Lee Enterprise’s operating margin is 14 percent, according to a recent SEC filing.

Would Buffett like to own Lee? “It wouldn’t surprise me,” said Morton.