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TWST: What are the trends in newsprint pricing? Is the cost of newsprint likely to become more onerous in 2001?

Mr. Drewry: That’s the great debate at the moment. Newsprint prices have been going up for the last 12 months. I term it a price recovery, not a price increase, if you’re looking at it over a longer-term basis. What I mean by that is that the price of newsprint collapsed in 1999. The price today is not much above where the price was two years ago — slightly above, but not significant. So if you look at price points over the last three or four years, you’re at a peak right now, but not significantly above where you were two years ago. So you are getting back what had been virtually money falling out of trees for the newspaper companies during the course of 1999, as you had prices recover back up to a 590-600 per metric ton level in 2000. Now, however, you’re at an inflection point. The producers want to take the price of newsprint up to a 650 list price per metric ton on March 1. That would be a breakout above what has proven to be the price equilibrium band of the last four years, that is, since 1996. Right now we’re skeptical that this price increase is going to happen, based on all the underlying indicators of the newsprint market that we’re seeing.

TWST: Put it together and tell us what the developments or events are that investors interpret as most bullish for the newspaper group. What are the issues to factor into a bullish outlook for 2001?

Mr. Drewry: Taking the last part first, our bullish outlook for next year is based on building momentum in advertising as the year goes on, starting from a slow to low base, and building as the year progresses. Looking back to the last time that occurred in 1999, that would be a very positive, number one driver for the stocks, in our view. Obviously that viewpoint is predicated on a renewed momentum for the economy as the year goes on. The economy will make it or break it. Behind that we see the Internet story for the newspapers getting more positive, or at the very least, the fear of competitive pressure lessening in investors’ minds, which should be a positive for the stocks.

TWST: Are there any other companies in the group that you would highlight? Is there a company that could surprise investors?

Mr. Drewry: I think Tribune. We downgraded Tribune (NYSE:TRB) a notch recently from a strong buy to a buy, and we’ve been a little more concerned here because their fundamental performance has been fairly poor of late relative to its peer companies. But it’s a real show-me story. Management has a lot of issues, including executing on the major acquisition that they made last year of Times Mirror. But if successful, there could be significant upside.

TWST: What was your view of that acquisition?

Mr. Drewry: I thought and continue to think that the acquisition has a lot of potential, and that the Times-Mirror properties were somewhat undermanaged as far as margin potential. But again, it could be somewhat of a transforming acquisition for Tribune, so there’s a big job for management there. It could be a home run, it could be a neutral. Given the nature of the business, I doubt that acquisition would ever turn out to be a failure in retrospect. But management will have to execute to make it into a home run.