This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Ugly Radio Shack Has Beautiful Bones

Editor's note: Jim Cramer told viewers of his "Mad Money" TV show on Tuesday that Intuitive Surgical (ISRG) and Potash (POT) are two ugly ducklings set to become beautiful swans. Here's another stock with those same characteristics.

NEW YORK ( TheStreet) -- Beauty truly is in the eye of the beholder, and as a value investor, I sometimes take positions in names that appear downright ugly to many investors. I will buy the "ugly ducklings" because I sometimes see what others don't.

On the other hand, sometimes others don't see what I do, because it's all a mirage, and my investment thesis is just plain wrong. But that's par for the course, at times, and the hope is that you are right more often than you are wrong.

This strategy is not always about buying names that have fallen on hard times, but have bright futures. It's often about buying names that have been so beaten down, that their prices have fallen well below the value of their ugliness. If they have a future, well, it may not be that bright. But the market believes that there is no future, and prices the stock accordingly.

I can think of no better example than RadioShack (RSH - Get Report), which had been all but written off last December, as the stock price dipped below $2. Here was an antiquated retailer (strike one), in the retail electronics business (strike two), with falling revenue, declining margins and substantial debt (strike three, four and five). There was little to like, given the numerous retailer troubles we've seen in recent years, especially in the electronics space.

RSH Chart RSH data by YCharts

I resisted RSH for quite a while as the stock price continued to decline, and the dividend grew fatter; a dividend that I knew needed to be eliminated, which it was. Finally, when the stock became a net/net (trading below net current asset value), I started taking a position, and have added along the way as the price fell further.

The good news is that RSH has been a big winner so far this year, and is up 69% year to date, and that includes a 15% pullback since mid-May. The stock is still universally disliked, however, and certainly not out of the woods. But there have been some positive changes in recent months, including a new CEO, Joe Magnacca, who had success at drugstore chain Duane Reade, prior to becoming an executive VP at Walgreens (WAG).

After joining the company in February, Magnacca gave himself 100 days to put together a revival plan to present to the board of directors. The company also ended a mobile phone partnership with Target, which ended up being a low-margin disaster for RSH.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
RSH $0.31 12.76%
AAPL $129.36 0.00%
FB $79.33 -0.34%
GOOG $573.64 0.00%
TSLA $199.56 0.00%

Markets

DOW 18,203.37 -85.26 -0.47%
S&P 500 2,107.78 -9.61 -0.45%
NASDAQ 4,979.9010 -28.1950 -0.56%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs