RadioShack's Best News

Despite store overhauls and major remerchandising efforts, RadioShack couldn't get any support. With a renowned investor stepping up, that could change.

Jan 22, 2014 at 3:44PM

On the vast island of forgotten retailers, few were hit harder by technological disruption than RadioShack (NYSE: RSH). The company made its mint selling products such as answering machines, calculators, and other things you have on your iPhone and will never buy separately again. Over the past few years, its stores have languished and management has tried every trick in the book to plug the hole in the bottom of its business model -- employee reductions, store renovations, store closures, strategic partnerships, exploring strategic alternatives, etc. Today, the company's strongest asset is its real estate, which is actually great. RadioShack is an aristocrat of the strip mall universe, holding its place in the corner next to laundromats and liquor stores from one coast to the other. Now the company has picked up another valuable asset -- Jamie Zimmerman.

The special situations expert recently took an 8.1% position in the company. Zimmerman's event-driven Litespeed Management hedge fund is well-versed in the areas of distressed debt, mergers, and bankruptcy. Her substantial interest in RadioShack at least points to pending action at the ailing retailer.

RadioShack management has not been sitting idly by while the situation erodes; the company has a seasoned turnaround expert at the helm and is pulling out all the stops to make this thing work. CEO Joe Magnacca helped steer pharmacy giant Walgreen into sunny days with moves such as the successful integration of Duane Reade. Magnacca cut the number of items on RadioShack shelves down substantially as part of a merchandising overhaul.

The problem was, customers weren't so much dissatisfied with the stores as they just didn't have a reason to enter one. RadioShack is associated with yesterday.

What now?
Given that the stock recently hit its 52-week low and looks nearly hopeless, deep-value buyout sharks could be circling RadioShack. Any buyer would have to account for the company's aforementioned real estate portfolio and likely award investors a good premium to today's price.

It's also possible that Zimmerman sees the operating business pulling itself out of the rough, but that seems less likely. A quick glance at Litespeed Management's betting history shows a series of minimum-to-zero downside risk scenarios. Her firm's investment in HIT Entertainment, the debt-laden company that owned brands such as Barney and Bob the Builder, was built upon the company's liquidation value. Zimmerman assumed HIT was going bankrupt (it was bought by Mattel instead), and knew she could earn her money when the brands were sold off.

Zimmerman's vote of confidence in RadioShack is the most compelling piece of news to come near the company in a long time. Whatever the star fund manager sees in the company, whether it's zero downside or attractive upside, retail investors may want to have a look.

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Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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