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RadioShack Is Ailing but Not Dead Yet

On the mildly positive side, the company has been opening newly designed "concept" stores and has continued to shake up management, the latest move the hiring of a new chief financial officer, John Feray, who was formerly senior vice president of finance and strategy for Dollar General (DG - Get Report).

Last month, RadioShack signed a new five-year financing agreement, totaling $835 million, which should put any current liquidity concerns to bed, at least for now. Of course, the downside here is that the financing did increase borrowing costs.

The stock got a nice boost last week, rising 18% on Wednesday, after it was disclosed that Jamie Zimmerman's Litespeed Management had taken an 8.1% stake in the company. It's a positive to see a hedge fund take such a sizable stake at this point when most investors have given up.

That certainly doesn't guarantee success; it just means that there's another fool or genius out there, a fund manager who is willing to make a sizable investment in a distressed entity, which gives some comfort that you are not the only one who sees value.

RSH Chart RSH data by YCharts

Of course, these situations are fraught with risk; bankruptcy is a possibility, and any positions taken by investors should be relatively small.

We'll see in time whether RadioShack was indeed a value trap and end up at the place where past-their-prime electronics retailers go to die, or whether a renewed, scaled-back and mildly profitable entity will emerge.

Must Read: Jan. 24 Premarket Briefing: 10 Things You Should Know

At the time of publication, Heller was long on RadioShack.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Jonathan Heller, CFA,CFP® is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

  Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.
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