Top Picks for 2010: Emerson Radio (MSN)

Posted Dec 27th 2009 3:00PM by Steven Halpern
Filed under: Newsletters, Stocks to Buy, Best Stocks for 2010

This post is part of a special report, Top Picks for 2010, the 27th annual survey in which TheStockAdvisors.com asks the nation's leading advisors for their single favorite stock for the new year. See all 80 stocks listed here.

"Emerson Radio (MSN) is an attractive, low-priced stock," says Bill Matthews, a specialist in lower-priced issues.

The advisor, who has been publishing The Cheap Investor for nearly three decades, suggests, "The stock has the potential for significant appreciation in 2010."

Matthews explains, "In this market, we wanted to recommend a quality low-priced stock that is relatively safe, has good increasing revenues and outstanding earnings.

"We are also looking for a stock that is selling at an attractive low price, and has the potential for significant growth and stock appreciation in 2010. Emerson Radio fits these criteria.

"Emerson Radio is a household name. Together with its subsidiaries, it engages in designing, marketing, selling, and licensing various consumer appliance, electronic and houseware products.

"It products are sold in the United States and internationally. Emerson Radio Corp. markets its products under the Emerson and HH Scott brands.

"The company distributes its products primarily through mass merchandisers, discount retailers, toy retailers, and distributors and specialty catalogers in the United States.

"Emerson has an excellent balance sheet with $29 million or $1.06 per share in cash, a book value of $2.25 per share and less than $6 million in debt. Insiders own 65% of the 27 million total shares outstanding and 22 institutions own 17% of the float.

"Emerson has excellent financials for the six-month period ended September 30. Revenues are $107 million up from $97 million a year ago. Net income is $4.3 million or $0.16 a share up from a loss of ($242,000) or (.01) a share verses a year ago.

"If you look at Emerson's stock chart between June 2002 and June 2003, you'll see that the price soared from $1.50 to $7.50 because of excellent revenue and earnings increases. We believe, that if Emerson continues its earnings growth, the price could skyrocket again."

Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stocks of the nation's leading financial newsletter advisors.

Tags: bill matthews, cheap investor, Emerson Radio, HH Scott, MSN, steven halpern, thestockadvisors.com

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Reader Comments (Page 1 of 1)

12-28-2009 @ 10:33AM

Skeptic said...

Steven Halpern, the writer of this article, highlights Bill Matthews of "The Cheap Investor" as choosing Emerson Radio as one of their top choices. Matthews, according to Halpern, apparently sees it's as one with a great future. "In this market, we wanted to recommend a quality low-priced stock that is relatively safe, has good increasing revenues and outstanding earnings."

Emerson as relatively safe? That's pretty questionable given history.

According to Halpern, Matthews paints a rosy picture of Emerson Radio (MSN). But Halpern doesn't provide any mention whatsoever of potential risks or downside or history of the firm (Did Matthews?). Those omissions are glaring. A little due diligence uncovers a very shady side to Emerson with many red flags. Any investors need to be informed of a long history of management shenanigans at the company (starting from the purchase of the majority interest in MSN by it's current Asian owners several years ago) before making any investment in this name. Halpern also neglects to mention if he, Matthews or Matthews' firm have a position in the stock, or if any of them are being compensated in some other way.

Steven Halpern might want to mention that senior management has a long hstory of playing games and using the company as their own private piggy bank, funding some very shady non arms-length transactions and making questionable non arms-length loans. While they supposedly instituted better controls at the company, it's still hard to believe the financial statements given the red flags. And as of last quarter, they still hadn't reinstituted their conference calls (so even with the better reported results, they didn't want to face shareholders which is shady and telling).

All potential investors would all be well advised to read the last couple of years worth of financials carefully, including the proxies and 8K filings. They clearly detail the above mentioned shenanigans -- the wiseguy behavior of the Asian majority owners, the resignation of directors (at least one of the departing directors alleged financial foul play in his resignation letter and said he could no longer serve), the auditor change to a no-name firm and the lawsuits.

Given how few trading days are left in the year, the rally in the stock prices feels suspiciously like someone is walking the stock up to get a better year end mark which often happens in extremely low volume, easily manipulated stocks. While the trading volume has picked up for MSN, it's still tiny.

Please do careful due diligence on this name before investing. There's much more to this story.