The market has a habit of making simplistic distinctions. For example, old media is bad, new media is good. Sometimes the distinction works, but in doing so the market can miss opportunities as established companies transition to the digital economy.
Consider Fairfax Media. The market rightly obsessed about Fairfax’s exposure to newspapers and the loss of advertising revenue to Google and Facebook. The bears argued Fairfax, in an industry in deep structural decline and facing cyclical headwinds, was terminal.
Every stock has its price. Rational observers saw the value being created in Fairfax’s property advertising operation, Domain, expected to be spun off as an ASX-listed company. Or, more recently, the emerging value in the joint-venture streaming service, Stan.