The analysis of display advertising market share rarely mentions the tier of sites below the largest ones by audience. Those most likely to be hurt badly, if they have not already been, are the online sites of old-line media companies. The New York Times (NYSE: NYT) has had trouble with its very modest online ad growth. Among sites measure by Comscore, it had 76.4 million unique visitors in December to Facebook’s 152.5 million. And Facebook’s audience continues to grow quickly. The New York Times’ does not. Gannett (NYSE: GCI), which announced earnings yesterday, has confronted the same challenge. Its increase in internet ad revenue last quarter was depressing and hardly enough to offset drops in traditional print advertising. It had 44.1 million unique visitors in December, despite the fact that it owns the giant national newspaper USA Today. Scripps Networks (NYSE: SNI) and the Washington Post (NYSE: WPO) are in a position that is just as difficult.

Facebook has not only started to squeeze out the major portals. It takes an ongoing piece of a market that has thousands of websites in it. This display advertising market, which appeared so promising just a few years ago, is hardly promising at all.

Douglas A. McIntyre

The for-profits face tighter rules on recruiting and somewhat closer oversight on graduation and job placement rates. Student loan defaults continue to be a problem, and last month the US Government Accounting Office reported on widespread cheating at some of the schools. And one of the schools, Career Education Corp., had its CEO resign. All in all, what was once a high-flying sector has lost a good deal of its appeal.

Apollo Group, which owns the University of Phoenix, is the largest of the for-profit operators based on student enrollment. The company’s stock has a median target price of $54.00, up from $53.00 on November 1st. At a current price of $50.01 at around noon today, the potential upside for the shares is 8%. Shares have gained nearly $4.00 since November 1st.

The Washington Post owns the Kaplan schools. The company’s median target price is a meaningless $275.00 from a single broker who must not have noticed that the share price is now $349.00. The drag on the company’s stock comes from its newspaper operations, of course, without which the Post would be operating at a loss.

Strayer has a median target price of $100.00, down from $104.00 on November 1st. The current share price is $99.43, leaving an implied gain of less than 1%. The company recently purchased the Jack Welch Institute of Management, which gave the stock a shot in the arm. Shares are down about -28% for the past 12 months.

DeVry has a median target price of $52, slightly lower than its target of $52.50 on November 1st. The shares are trading today at $35.22, for a potential upside of 47.6%. The stock goes ex-dividend tomorrow in advance of its twice-yearly dividend payment of $0.15/share. DeVry’s stock is down nearly -20% for the past 12 months.

Career Education has a median target price of $9.50, a drop of more than -50% from its target of $20.00 on November 1st. Shares are trading today at $7.33, for a potential upside of 29.6%. Of all these stocks, this one has been hammered the most over the past year, with a share price loss of nearly -61%. The CEO resigned last month, and 49 of the company’s schools must this month show reasons why they should not lose their accreditation.

Of these schools, only Apollo, which has seen its share price grow by about 37% in the past year offers even the remotest opportunity for investors. The stock’s 52-week high is less than $0.25 higher than its new target price, and the company claims that it came out clean in the GAO cheating investigation because it was one of the three schools to deny admission to students based on insufficient credentials. Enrollments are the key for Apollo, though, and it will have to spend more to keep those enrollments up.

The rest of this group is so weak that even lowered targets may be well out of reach. Overall, for-profit schools are unlikely to repeat the rapid growth they managed just a few years ago. There could be some consolidation in this sector or some closures. Either would be a big help.

Paul Ausick

The US Government Accountability Office (GAO) has issued a new report on for-profit education that was prepared at the request of US Senator Tom Harkin (D-IA), a long-time critic of the for-profit sector. This report focused on how closely the colleges adhered to their own policies related to admissions credentials, cheating, and counseling students who withdraw.

The GAO does not identify the 15 schools included in the study by name, but it does say that the study did include the top 5 based on enrollment in 2008. The likely suspects include Apollo Group Inc. (NASDAQ: APOL), Education Management Corp. (NASDAQ: EDMC), The Washington Post Co. (NYSE: WPO), DeVry, Inc. (NYSE: DV), ITT Educational Services Inc. (NYSE: ESI), Strayer Education Inc. (NASDAQ: STRA),. and Career Education Corp. (NASDAQ: CECO).

The study resembled an undercover sting operation. The GAO tried to enroll students with false high school credentials, and once admitted, the students plagiarized assignments, turned in clearly incorrect assignments, and regularly skipped class. The overall results indicated that 8 of the 15 schools mostly complied with their own policies, while at the other 7 the GAO said it found “mixed results.”

Regarding academic performance policies, the GAO had this to say:

At 6 colleges, instructors acted in a manner consistent with school policies in this area, and in some cases attempted to contact students to provide help outside of class. One or more instructors at 2 colleges repeatedly noted that the students were submitting plagiarized work, but no action was taken to remove the student. One or more instructors at the 4 remaining colleges did not adhere to grading standards. For example, one student submitted photos of celebrities and political figures in lieu of essay question responses but still earned a passing grade.

That totals only 12 schools because 3 of the schools refused to admit students who could not provide acceptable high school credentials.

By itself, this study probably won’t have much effect on the for-profit schools share prices, but it does let investors know that the schools’ policies and practices remain under scrutiny. There is little question that the prosperity that these schools achieved in the 2000s was largely due to the huge increase in federal student loan dollars that flowed in as the schools’ enrollments surged. Changes in federal law and continuing investigative pressure will definitely have an impact on these schools going forward.

Senator Harkin is also investigating the recruiting of military veterans by the for-profit schools. Due to a quirk in the law, veteran’s benefits are not included in the requirement that no more than 90% of a school’s revenue can come from federal financial aid programs. In 2010-2011, veteran’s education payments to 8 for-profit schools increased by 86%, to $627 million, about 14% of the $4.4 billion total veteran education benefits for the 2010-2011 academic year.

For-profit schools will stay on the radar both because of the ongoing investigations into their activity, but also because budget-cutting time in the US Congress could hit these schools pretty hard.

Paul Ausick

M&T Bank Corporation (NYSE: MTB) is 5.38+ million shares, UP ONLY A TAD from the 5.363 million last quarter but this one had been cut in prior quarters.
Mastercard Inc. (NYSE: MA) was 405,000 shares valued at $128.45 million.  The position is the SAME AS last quarter but still almost double from the quarter before.
Moody’s Corp. (NYSE: MCO) was 28.4 million; SAME AS last quarter but way down from prior quarters and years.
Procter & Gamble (NYSE: PG) was 76.7 million shares and listed as THE SAME as last quarter but lower than the 96.3 million shares in prior quarters.
Sanofi-Aventis (NYSE: SNY) was 4.06 million shares; SAME AS before.
Torchmark Corp. (NYSE: TMK) was more than 4.2 million, a LARGER POSITION than the 2.82 million shares last quarter.
US Bancorp (NYSE: USB) was roughly 69 million shares; SAME AS before.
USG Corp. (NYSE: USG) was 17.072 million shares; SAME AS before.
United Parcel Service (NYSE: UPS) was 1.429 million shares; SAME AS before.
Verisk Analytics, Inc. (NASDAQ: VRSK) was ALMOST DOUBLE in shares at 4.202 million worth $146.1 million versus the 2,101,125 shares a quarter before when it had been started as a new position.
Visa Inc. (NYSE: V) is a NEW POSITION of 2.291 million shares worth $96.44 million.
Wal-Mart Stores Inc. (NYSE: WMT) was just over 39 million shares; SAME AS before after having been raised in 2010.
Washington Post (NYSE: WPO) was over 1.72 million shares; SAME AS before and Buffett kept his word so far about holding the Washington Post shares despite stepping down from its board.
Wells Fargo & Co. (NYSE: WFC) over 361 million shares a HIGHER POSITION than the 352+ million last quarter.

PAGE ONE…BUFFETT HOLDINGS ‘A to K’

As noted earlier… today’s holding disclosure has missing data as Berkshire Hathaway was given permission and likely still does not include the full holdings: Confidential information has been omitted from the Form 13F and filed separately with the Commission.

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Alaska Communications Systems Group Inc. (NASDAQ: ALSK) Cut to Underperform at BofA/ML.
Autodesk Inc. (NASDAQ: ADSK) Cut to Neutral at BofA/ML.
Avon Products, Inc. (NYSE: AVP) cut to Underperform as Bear of the Day at Zacks.
Blue Nile Inc. (NASDAQ: NILE) Cut to Sell at Deutsche Bank.
China Automotive Systems Inc. (NASDAQ: CAAS) Cut to Neutral at Piper Jaffray.
DreamWorks Animation SKG Inc. (NYSE: DWA) Cut to Sell at Janney.
Equity Residential (NYSE: EQR) Raised to Buy at Argus.
H&R Block, Inc. (NYSE: HRB) Raised to Outperform at Oppenheimer.
Priceline.com Inc. (NASDAQ: PCLN) Cut to Hold at S&P Capital IQ (late-Tuesday).
Rite Aid Corporation (NYSE: RAD) Raised to Outperform at Credit Suisse.
Rovi Corporation (NASDAQ: ROVI) has seen at least three downgrades: Collins Stewart, CLSA, Brean Murray.
Spectrum Pharmaceuticals, Inc. (NASDAQ: SPPI) named Momentum stock of the day at Zacks.
Textainer Group Holdings Limited (NYSE: TGH) named Value stock of the day at Zacks.
Walgreen Co. (NYSE: WAG) Cut to Neutral at Credit Suisse.
The Washington Post Co. (NYSE: WPO) named Bull of the Day at Zacks.

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JON C. OGG

Publishers claimed that as the last recession deepened, their industry was in a cyclical decline. The industry would right itself financially when the economic trouble had passed. Most industry analysts disagreed. The problem was secular, they said. Online news outlets had taken away too many readers and too much advertising. Major newspapers had only a decade of life, if that.

The success of online subscription sales for some newspapers is the most positive change that has occurred. This is particularly true of the New York Times and the Wall Street Journal. They invest in news coverage that is broad and deep enough to make their content extremely valuable to large numbers of readers. Many subscribers recognize this value for these newspapers and are willing to pay to have access to articles online. This is an important point to consider since most online news is free.

24/7 Wall St. examined the fortunes of the ten largest newspapers in the United States by daily circulation. We have also looked at online visitors based on data from research firm Compete. What we found was that a small number of these properties have good financial prospects. The others are not much better off than they were at the depth of the recession, despite of the significant costs that they have cut from the business.

The ten companies we have looked at are Apollo Group (NASDAQ: APOL), Education Management (NASDAQ: EDMC), American Public Education (NASDAQ: APEI), Strayhorn Education (NASDAQ: STRA), DeVry (NYSE: DV), Washington Post (NYSE: WPO), Corinthian Colleges (NASDAQ: COCO), Bridgeport Education (NYSE: BPI), Grand Canyon Education (NASDAQ: LOPE), and Career Education (NASDAQ: CECO).

All data is from Yahoo! Finance, and current share prices were gathered in the mid-afternoon today.

Apollo Group has a median target price of $53.00 from 15 brokers. Shares are trading today at $46.09, for an implied gain of $6.91, or 15%. Apollo’s forward P/E is 12.72 and the company does not pay a dividend. The stock’s 52-week trading range is $33.75 to $54.23, and at today’s price that is about 37% above its 52-week low and 15% below the 52-week high. The company reported better-than-expected quarterly earnings a couple of weeks ago and jumped more than 10% in a day. But lower enrollments plague the company, which has managed to keep revenue up by raising tuition and fees.

Education Management has a median target price of $20.00 from 11 brokers. Shares are trading today at $20.48, about 0.5% above the target price. Education Management’s forward P/E is 13.36 and the company does not pay a dividend. The stock’s 52-week trading range is $11.56 to $28.61. At today’s price it is about 77% above its 52-week low and 28% below the 52-week high. The company beat both quarterly EPS and revenue estimates when it reported earnings last week. But a warning on future enrollment and profit declines have cooled enthusiasm for the shares.

American Public Education has a median target price of $45.00 from 10 brokers. Shares are trading today at $35.11, for an implied gain of $9.89, or 28%. APEI’s forward P/E is 14.50 and the company does not pay a dividend. The stock’s 52-week trading range is $26.15 to $49.29, and at today’s price that is about 49% above its 52-week low and 26% below the 52-week high. The company reports earnings next week and is expected to post EPS of $0.42 on revenue of $62 million. The EPS figure is less than the June quarter, but better than the same period a year ago.

Strayhorn Education has a median target price of $104.00 from 12 brokers. Shares are trading today at $83.06, for an implied gain of $20.94, or 25%. Strayhorn’s forward P/E is 11.39 and the company pays a dividend yield of 4.6%. The stock’s 52-week trading range is $69.34 to $165.73 Today’s price is about 29% above its 52-week low and 50% below the 52-week high. The company reports earnings on Thursday and is expected to post EPS of $1.07 on $139 million in revenue. That is a big dip from the same quarter a year ago, when EPS came in at $1.72, and an even bigger dip sequentially, from $2.53 in the June quarter.

DeVry has a median target price of $52.50 from 16 brokers. Shares are trading today at $38.14, for an implied gain of $14.36, or 38%. DeVry’s forward P/E is 8.55 and the company pays a dividend yield of 0.6%. The stock’s 52-week trading range is $34.24 to $66.85, and at today’s price that is about 11% above its 52-week low and 43% below the 52-week high. The company missed both EPS and revenue projections last week when it reported its first fiscal-quarter 2012 results. Enrollment was also lower as bleak job prospects keep potential students away.

Washington Post has a median target price of $275.00 from just a single broker. Shares are trading today at $336.80, about 18% above the target price. The forward P/E is 19.44 and the company pays a dividend yield of 2.6%. The stock’s 52-week trading range is $308.50 to $455.68. Today’s price is about 9% above its 52-week low and 26% below the 52-week high. The Kaplan education division of the company contributes more than 50% of Washington Post’s revenues and nearly half of net income. The company is expected to post EPS of $3.85 on revenue of $1 billion this Friday. The lack of coverage makes this stock a tough one to figure out.

Corinthian Colleges has a median target price of $2.00 from 10 brokers. Shares are trading today at $2.04, fractionally above the target price. Corinthian’s forward P/E is 9.93 and the company does not pay a dividend. The stock’s 52-week trading range is $1.24 to $6.12, and at today’s price that is about 65% above its 52-week low and 67% below the 52-week high.

Bridgeport Education has a median target price of $26.00 from 10 brokers. Shares are trading today at $22.94, for an implied gain of $3.06, or 13%. Bridgeport’s forward P/E is 8.88 and the company does not pay a dividend. The stock’s 52-week trading range is $13.89 to $30.62, and at today’s price that is about 65% above its 52-week low and 25% below the 52-week high. The company posted better-than-expected third-quarter earnings this morning and raised full-year EPS guidance to $2.95 to $2.98. Enrollment is expected to fall by about 5,000-8,000 students by the end of December.

Grand Canyon Education has a median target price of $18.50 from 10 brokers. Shares are trading today at $15.97, for an implied gain of $2.53, or 16%. Grand Canyon’s forward P/E is 13.22 and the company does not pay a dividend. The stock’s 52-week trading range is $12.26 to $20.66, and at today’s price that is about 30% above its 52-week low and 35% below the 52-week high. The company reports third-quarter earnings next week and is expected to post EPS 0f $0.25 on $109 million in revenues.

Career Education has a median target price of $20 from 11 brokers. Shares are trading today at $15.79, for an implied gain of $4.21, or 27%. The forward P/E is 8.77 and the company does not pay a dividend. The stock’s 52-week trading range is $12.24 to $27.60, and at today’s price that is about 29% above its 52-week low and 43% below the 52-week high. The company reports third-quarter earnings next week, and the consensus EPS estimate is $0.34 on $457 million in revenue. The EPS estimate has been trimmed from $0.46 over the past three months. Shares gained nearly 5% on October 19th, following the strong earnings report from Apollo.

Paul Ausick

Conventional wisdom was that the newspaper industry would recover somewhat with the economy. That does not mean it would return to its best days in the 1990s and earlier, when many properties had margins of 20% or better. Classified advertising has been permanently damaged by online services like Craigslist. National advertising, however, and online sales were expected to strengthen as the American economy bounced back from an awful recession.

The New York Times announcement dashed  the most hopeful wishes of the industry. The Times has the largest internet audience in the U.S. The firm’s sites had 66.1 million unique visitors in August, according to Comscore. That puts its traffic well ahead of Gannett (NYSE: GSI), the nation’s largest chain, which had 44.2 million unique visitors, and the Washington Post (NYSE: WPO), which brought in 25.9 million. Classified revenue, decimated over the past five years, could drop even further. Craigslist had 55.2 million unique visits in August.

The newspaper industry’s hope for a secular recovery has had as its foundation the idea that quality content would be a magnet for readers, and, in turn, advertisers would see those readers as loyal. It turns out, as the newspaper figures show, that content and loyalty mean very little. Even portals like Aol (NYSE: AOL), and Microsoft’s (NASDAQ: MSFT) MSN have suffered revenue losses as more and more of the online advertising revenue has moved to sites without premium content, especially Facebook and YouTube.

Wall St. probably never expected shares in the Times to return to 2009 lows around $4. Shares trade for just over $6 now. The newspaper industry was never going to have a spectacular recovery. It is prone to seasonal movement in the economy just as most industries are. And, to make matters worse, much of the revenue that was once a mainstay of newspapers, and its new line of online revenue, is being eroded more quickly than predicted. The industry’s decline has become permanent, as was initially feared two years ago.

Douglas A. McIntyre

Those are some of the results reported by comScore Inc. (NASDAQ: SCOR) in its report on the Top 50 Web Properties for the month of August.  The top five sites in number of unique visitors were Google Inc. (NASDAQ: GOOG), Yahoo Inc. (NASDAQ: YHOO), Microsoft Corp. (NASDAQ: MSFT), Facebook, and AOL, Inc. (NYSE: AOL). Google picked up about 1 million visits compared with July’s numbers, Yahoo lost about 100,000 visit, Microsoft gained nearly 3 million, Facebook gained about 300,000, and AOL picked up nearly 4 million.

Among leading e-commerce sites, Amazon.com (NASDAQ: AMZN), with almost 102 million visits led EBay (NASDAQ: EBAY), which boasted nearly 74 million visits, Wal-Mart Stores Inc. (NYSE: WMT), which claimed about 39 million visits, and Target Corp. (NYSE: TGT), which posted over 26 million visits. Amazon’s month-over-month growth totaled nearly 4 million, almost 4x better than any of the improvements posted by the other on-line retailers.

Among newspaper web sites, the New York Times Co. (NYSE: NYT) posted more than 66 million visits followed by Gannett Co. Inc. (NYSE: GCI) with more than 44 million visits and the Washington Post Co. (NYSE: WPO) with about 26 million visits. The New York Times’s new subscription plan does not appear to be affecting page visits negatively.

Google’s lead over Yahoo and Microsoft is not insurmountable at a current difference of just 5 million visits. But visits don’t reflect the ads presented, and its there that Google’s lead is far wider. Facebook, which trails Google by about 20 million visits, is becoming a larger force in the battle for on-line ads.

Among the e-commerce players, Amazon’s early mover advantage over Wal-mart and Target may never be closed. Amazon simply offers more innovations more quickly than the two bricks-and-mortar stores can react to. Ebay’s strength remains, but it trails Amazon by 25 million visits and is not closing the gap.

Among newspaper companies, the New York Times has pretty well crushed the Washington Post and continues its likely insurmountable lead over Gannett. Still, having three newspaper properties in the Top 50 is not a bad showing. Now if the papers could only figure out a way to make more money from the web.

One final note: Netflix Inc. (NASDAQ: NFLX) fell by about 500,000 month-over month. Given the current customer dissatisfaction with the company, that number may continue to fall. It’s worth noting.

Paul Ausick

Mastercard Inc. (NYSE: MA) was 405,000 shares, ALMOST DOUBLE from the 216,000 shares last quarter as a prior new position.  Now valued at $122 million.
M&T Bank Corporation (NYSE: MTB) is 5.363 million, SAME AS before but had been cut in prior quarters.
Moody’s Corp. (NYSE: MCO) was 28.4 million; SAME AS last quarter but this is down from prior reports as Moody’s is slowly getting cut.
Procter & Gamble (NYSE: PG) was 76.7 million shares; SAME AS last quarter but lower than the 96.3 million shares in prior quarters.
Sanofi-Aventis (NYSE: SNY) was 4.06 million shares; SAME AS before.
Torchmark Corp. (NYSE: TMK) was 2.82 million shares; SAME AS before.
US Bancorp (NYSE: USB) was roughly 69 million shares; SAME AS before.
USG Corp. (NYSE: USG) was 17.072 million shares; SAME AS before.
United Parcel Service (NYSE: UPS) was 1.429 million shares; SAME AS before.
Verisk Analytics, Inc. (NASDAQ: VRSK) was 2,101,125 shares, a NEW POSITION listed as $72.7 million as of June 30.
Wal-Mart Stores Inc. (NYSE: WMT) was just over 39 million shares; SAME AS before after having been raised in 2010.
Washington Post (NYSE: WPO) was over 1.72 million shares; SAME AS before and Buffett kept his word so far about holding the Washington Post shares despite stepping down from its board.
Wells Fargo & Co. (NYSE: WFC) was over 368.6 million; this one GREW AGAIN from the 358.9 million shares at March 31, 2011; was listed as over 342 Million shares one quarter earlier and over 336.4 million two quarters before that.

PAGE ONE…BUFFETT HOLDINGS ‘A to L’

As noted earlier… today’s holding disclosure has missing data as Berkshire Hathaway was given permission and likely still does not include the full holdings: Confidential information has been omitted from the Form 13F and filed separately with the Commission.  

Wesco Financial Corp. (NYSE: WSC) was not listed but that is because it was acquired by Berkshire.

You are invited to join our free daily email distribution list to hear more news on Buffett and other investment gurus, IPOs, secondary offerings, private  placements.

JON C. OGG