A few weeks ago, a friend and Investment of the Week reader asked me if he should really buy the stocks I write about here. Before I could answer, my father, who was listening, quipped, “Have you ever heard the saying, ‘You get what you pay for?’”
Not to undermine myself, but he’s right. There’s a reason we’re able to stay in business selling newsletter subscriptions.
Investors are uniquely willing to pay for information because they depend on it to make (and not lose) them money. Prior to coming to the Dick Davis Digests, I was a reporter at a financial news service that charged thousands of dollars a year for access. The price was worth it to a select group of Wall Streeters who could make or lose millions by knowing that a company was going to file for Chapter 11 a day or two ahead of time. (It was 2009 and I was covering the publishing and gaming industries, so there were plenty of filings.) For the same reason, the business-focused Wall Street Journal has so far been alone among the major American newspapers in successfully getting readers to pay for its online content.
However, there are few, if any, other businesses where information can command that kind of a premium—especially with the fount of information now available for free online. The Internet has improved journalism in myriad ways—now, everyone can be a fact checker, and people who consume news online are more likely to get it from multiple sources—but it’s also caused plenty of trouble for those in the business of selling news. I live in an apartment building with over 40 units, and there are never more than four newspapers outside (several of which usually seem to be leftover from the days before).
After responding by cutting staff, costs and coverage to the bone, many major newspapers have been pushed to the breaking point recently, and have finally decided that giving news away for free online is simply unsustainable. The New York Times will be implementing a pay wall for heavy users any day now, and Google just introduced a Google Checkout-based subscription-selling service targeted at online news and information providers.
On one hand, I’m glad this is finally happening—seeing the journalism business waste away has been painful for a former reporter and news junkie like myself, and I hope that turning readers into paying customers will help the Times and other papers maintain (and in some cases, return to) their high standard of quality.
On the other hand, it’s upsetting to me to see good journalism walled off from the public, while sources like The Huffington Post, Drudge Report and network TV remain free. Of course, the reason those sources make me cringe a bit—a hefty dose of entertainment and viewer pandering stirred in with their “news”—is the same reason they can afford to give away their content for free. I can’t have it both ways, I know.
But, as my father said, you get what you pay for. And if free “infotainment” becomes the dominant news source for most people, I can’t help but think that we’ll be a slightly less-well-informed group. Of course, 73% of Americans already watch national network or cable news and 78% watch local TV news, compared to only 50% who still read a newspaper, so maybe I’m crying over milk that was spilt long ago. But 61% of Americans get at least some of their news online, and that number is growing, so the caliber of free online journalism is certainly important to them.
I’d actually go so far as to say it’s also important to everyone who shares a country with them—having a well-informed public not only makes our national conversation more interesting, it’s also crucial to electing the best representatives to lead our country. Who would you rather have in the voting booth—someone who gets all their news from Twitter, or someone who reads and listens to well-researched, fact-based stories from multiple respected news outlets?
As for investing, the market continues to do its best to obfuscate its next move. Worsening news about Libya is jostling for front page-space with improving news about the American economy, and the bulls and bears are wrangling in their own way.
Today’s Investment of the Week is a good play for this kind of market: It’s a growth stock, so it could do very well in an economic and stock market rally situation. However, it also has defensive characteristics: It pays a 3.5% dividend, and it’s in a sector—healthcare—that was out-of-favor until recently.
The company is Healthcare Services Group (Nasdaq: HCSG), a leading provider of housekeeping, laundry and nutrition services to hospitals and other medical facilities. It was first recommended in the Dick Davis Dividend Digest all the way back in December 2009 by Richard Schmidt, editor of Stellar Stock Alert. The stock has split 3-for-2 since then, and appreciated nearly 30%, but Schmidt still thinks it’s a good buy here, especially given recent technical action. In an update in last week’s Dividend Digest, he wrote:
“Healthcare Services Group followed our January prediction perfectly. Here’s what we said last month: ‘Back in October, the stock gapped up to a new 10-year high at $17.05. The resistance at $17 proved too strong, though, as the stock pulled back from the new high. Since then, HCSG has moved sideways, staying just below that resistance level. The 50-day moving average is still north of the 200-day average. And the trend is still up. But the stock must break through this resistance level. When it does, it should do so in convincing fashion.’ We saw that ‘convincing’ action during the second week of February, when the stock moved up about 10% and broke through the $17 resistance level. Now that $17 level is providing support—and great reason to believe this uptrend has a long ways to run. HCSG remains a strong buy.”
For investors looking to put some money to work, Healthcare Services Group has a good story, a good chart and a good yield to boot.
Click here to learn more about Healthcare Services Group and other top stocks featured in Dick Davis Dividend Digest!
Wishing you success in your investing and beyond,
Chloe Lutts
