Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.
Radio Shack Corp. (NYSE: RSH) is the top speculative idea for 2007 from Dylan Jovine. The editor of The Tycoon Report notes, "The sale of the season is being offered by an emotionally unstable 'Mr. Market,' who, at the moment, happens to be very depressed on the retail sector in general and Radio Shack in particular.
"Meanwhile, I believe quality management is particularly important to the future prospects of any value investment. It's not the only thing I look at by any means, but with Radio Shack, it's what has me so excited.
"On July 7th of 2006, Radio Shack's board elected Julian Day to become Chairman and CEO of the company. This is the same man who took over at K-Mart and led them out of bankruptcy, increasing the company's value from $1.5 billion to $9 billion.
"The easiest and fastest thing Day will do is to focus on increasing operating margins. I would bet a lot of money -- based on Day's track record -- that he'll turn this ship around inside of the next 18 to 24 months. When Day is done doing his job, the chances are high that Radio Shack's margins will look similar to how they looked in 2000.
"That means net profit margins would soar from 4.2% back to 7.7%. If he'd come on board two years earlier, Radio Shack's profits would have soared 56% to $333 million in 2005. Per share earnings would have soared from $1.43 to $2.23.
"At 15 times earnings, the stock would be selling in the $33.45 range; at a 20 p/e the stock would be selling for roughly $44.61. With numbers like these, it's easy to see why Julian Day took most of his compensation in stock options."
To see Dylan's favorite conservative idea for 2007, click here.
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Reader Comments (Page 1 of 1)
12-27-2006 @ 12:32PM
Julian Day said...
You must think I'm some type of god. OK...yea...maybe...MAYBE...I'll be able to get this
company to show some type of decent profit in 18-24 months....A BIG MAYBE. Until then, I don't have much hope. Radio Shack is NO KMART. Remember, KMT was all realestate. RSH has none. This isn't going to be easy.
1-01-2007 @ 12:47AM
Lou Provost said...
Julian, I can't beleave you are saying these things. Trust, in your hard working store managers will save this company. Pay them to do the vodo that they do so well (Mel Brooks)and this company will take off again. Think like Charles Tandy would have.
1-06-2007 @ 10:20AM
Ben Harper said...
As a former manager of Radio Shack back in the days when they sold 80% Radio Shack brands and 20% outside brands the stock was great. Their margins were better. They sold Tandy Service Plans which as we all know puts money directly to the bottom line of the store and thus to the company. Today they sell crazy plans that don't protect the consumer. their products are exactly what you can purchase at Circuit City, Best Buy, Wal Mart, and Target; at better prices. They are a "me too store". Everyone has it and me too. Their service has gone down. They rely on the internet to replace their catalog - their catalog was what made them famous. Remeber the days of Good, Better, and Best for stereo systems - those were quality products backed by a quality company. Today, like I said, they are a me too store. Their sales clerks don't know anything about their products. Radio Shack has lost its "name brand recognition". Everyone knows when they would go buy a Realistic or Optimus stereo receiver, or speakers, or CD player, all of which were good quality products with a "service department" that would fix them - just bring them back to ANY Radio Shack in the country, including Hawaii. I don't believe they will be back on top ike they were as long as they are a "me too store".
1-06-2007 @ 3:14PM
ROBERT SOHOL said...
I told them at my local RADIO SHACK store that is was a big mistake to cut out there catalog. The first thing I turned to when I was looking for electronic equipment was the RADIO SHACKS catalog.
I miss it, I'm still a customer but not to the level
I use to be. R SOHOL
1-06-2007 @ 5:05PM
Joanna said...
Sorry, Ben if us (current) employees do not know much about your record players or 8 tracks to fix them, much less work them. Times move on, get over the catalog idea already! Most items go disco in amount of 90 days, How long does it take a catalog to be produced? So Most of the merchandise int he catalog would be disco'ed by the time the catalog even hit the shelf! How about asking pizza hut to bring back the large everything pizza for 5$???.... Sorry but times change and companies do too.
How about you ask ALL the people who buy products and return them when they are done to stop because all of us who want the product now have to pay more because of the douche bag who wanted it for the weekend???
2-03-2007 @ 10:43AM
Anonymous said...
We might be what you consider a me-too store in some areas but not when it comes to customer service. You can't go to Wal-mart and purchase a prepaid phone and get it activated there or even get them to add on airtime when the purchase it. When I took over this store in 2004, the previous manager had given us such a poor reputation. I stepped in with the intention that I would do everything to help my customers with their needs and wants.... and I ran sales gains for 24 consecutive months and increased my volume by 200,000. I think that more of our stores should focus on the customers. There are enough retail stores to clerk for the average consumers.... Most people want someone who is actually "thinking customers first" not just using it a fancy slogan. And as far as being knowledgable about products, I feel that we should have our associates focus on more than just wireless.....
2-09-2007 @ 4:11PM
XXX said...
Maybe if new/current management would actually treat their employeess like the human beings that they are AND pay them the wages they deserve, instead of constantly screwing the store managers out of pay every time they revamp pay plans, you just MIGHT have people who'll have the knowledge to pull RS's butt out of the fire. How many revamps have been done and out of those, how many have decreased managers' pay?
Customer service is the name of the game. You get it by paying your employees the right wage (NOT by misclassifying them) and educating them in the products they sell so they can help the customer. It used to be this way. Hasn't been for >10 years.
Rebound? I think not. RS is ripe for a takeover and the sooner the better.