Dear Reader,
“Is this the next MAGA trade?”
That’s the question I’ve been getting since Newsmax went public Monday at $10 a share.
It reached a peak near $280 a share this week, becoming more valuable than Fox.
Newsmax is a local media company and its CEO Chris Ruddy is a neighbor of ours – doesn’t work too far from our BTM office.
He was in the same business, selling independent research newsletters for independent investors before leaning into the TV business.
Years ago, we were direct competitors.
They pivoted right before Trump won to television.
So I’ve had a close seat to see how he’s grown.
A few of the people who work here at Behind the Markets used to work at Newsmax and it’s a fine company.
Since so many of you have written in asking if it is a buy, I’m going to answer by just going over some facts.
First, Newsmax came public at $10 a share, meaning investment bankers raised $75 million.
(I won’t mention their names because seeing shares go over $200 so quickly, one would think the investment bankers should be fired only raising $75 million when apparently, they could have raised half a billion.)
One job of investment bankers is to determine at what price a company should sell shares of its stock.
In this case, it’s like selling a house for $750,000 and the next day seeing the next-door neighbor get $5 million for the same exact house.
You’d say to your real estate agent, why didn’t you sell mine for $5 million?
So, I wouldn’t want to be Newsmax’s investment banker right now.
That aside, the question now is whether Newsmax makes a good investment today.
Here’s the facts:
First, Newsmax is most often compared to Fox News – a legacy media company (it’s interesting they’re taking a shot on that in this environment).
Second, Newsmax did $155 million in revenues last year, and earnings lost $58 million (so, $155 million gross, negative $58 million net).
Newsmax’s stock ran right up to a valuation of $30 billion.
So, $150 million company (not profitable), “worth” $30 billion.
It’s trading like a tech stock, like a Google-type company that solved a really big problem.
But, I’m not sure what problem they solved.
You look at Fox Corp, direct comparison, and Fox is valued at $24 billion.
Fox did $15 billion in revenue, and their earnings were +$2.2 billion.
So they’re trading at 11-to-12 times earnings.
When you look at the media space for a conservative news outlet to buy stock in, do you buy the company with $150 million in sales, with a $30 billion market cap?
Or do you buy the company with $15 billion in sales and a $24 billion market cap?
In my humble opinion, Newsmax stock is a bit rich for my blood.
We see this kind of pro-MAGA trade where Newsmax has gone bonkers…
Donald J. Trump Media Group has a $4.5 billion market cap, even though Behind the Markets is actually a bigger business than DJT Media Group.
It’s funny – it’s a very small business – DJT did just $3.6 million in 2024, with a $4.4 billion market cap.
Look, I have no problem with supporting and loving your political candidates. I think it’s great – it’s one of the things that make our country so wonderful.
But I’m not a fan of going out of my way to lose money.
There are plenty of opportunities to lose money betting on smart things – just look at the biotech sector!
Companies with lifesaving treatments, driven by incredible AI breakthroughs, have gotten crushed under the wave of daily bad news.
That’s tough enough – I’m not going to go out of my way to open my chin up and get punched in the face.
So, to answer your question…
Do I think Newsmax is a good company?
Yes, I think they’re doing some great stuff over there.
Do I think its stock is worth the price it’s selling for?
Do I think the company is more valuable than Fox News?
No.
Fox News’s profit alone is 14-times the entire revenue of Newsmax.
This is one I personally will steer clear of.
It’s cool, fun, amusing to watch, a distraction…
But most of all, it’s a warning sign.
It’s one of the signs that come along with an impending large market crash – when you see outrageous valuations like this it’s a sign of a bubble.
I talk about this in my “Four Steps to Profit from a Market Crash” report inside Midnight in America.
If you haven’t picked up your copy, it’s time.
“The Buck Stops Here,”
P.S. I actually do recommend private, pre-IPO companies…
Companies I carefully vet, having run an investment bank on Wall Street.
Readers have already had the chance to see 500% in 11 months… 566% in 10 months… and 800% in 19 months…
All from private deals, newly available to regular investors (no accreditation needed).
