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One investing strategy espoused by Jim Cramer is to take the opposite tack of what Wall Street analysts are doing and saying, specifically when a stock is moving in the opposite direction of the analysts' calls.

For instance, if all the analysts have a "sell" rating on a stock, but the stock is up 50% off of its lows, then it's a good time to buy. How come? As Cramer says in his book

Mad Money

, analysts "are bad at admitting mistakes." Once they are proved wrong, they will "hide their shame for getting it wrong." This is how Cramer games the moment when analysts start upgrading.


Wall Street Contrarian Plays

portfolio on Stockpickr lists 10 stocks that reflect the following criteria:

  • At least 10% of analysts covering the stock have a sell rating.
  • The stock is more than 50% off its 52-week low.
  • The stock sells for less than 12 times cash flow.



is a great example of a stock that analysts love to hate. Indeed, the electronics retailer seems to have everything going against it:

  • Problems with other consumer electronics chains like Circuit City could be industrywide;
  • Problems in the lagging cell-phone industry could affect RadioShack, which gets the bulk of its revenue from the wireless side;
  • Historical problems with inventory management, debt, etc. The last CEO had to resign after lying on his resume.

In other words, it's ugly, and the analysts have been racking up the sell ratings. But quietly, RadioShack has been turning things around and shareholders have taken notice, as its stock chart reflects:

RadioShack (RSH)

Eventually the analysts will reverse course. What has been driving the turnaround? CEO Julian Day has been shutting down underperforming stores, putting in better inventory controls and steadily improving the company's cash position.

RadioShack has $472 million of cash in the bank, which is enough to pay down $540 million in debt, particularly when taking into account its $382 million in earnings before interest, taxes, depreciation and amortization. The company trades for just 10 times cash flow (enterprise value over EBITDA), making this a potential buyout candidate for a private-equity firm.

Why do I believe RadioShack will get bought?

Look at the types of hedge funds and mutual funds that are buying the stock. They are retail specialists.

For instance,

Robert Olstein

of the Olstein Funds, who had a huge home run last year with

Jo-Ann Stores

( JAS), now has his sights on RadioShack. Olstein ended up being an activist in Jo-Ann, but I don't believe that will happen here. It appears that with RadioShack he may be along for the ride.

Olstein is a pure value guy, although lately it seems he's had some focus on retail. That said, he's also been accumulating spinoff plays like



and even tech giant (and now deep-value play)


(CSCO) - Get Free Report


Another holder of RadioShack stock is

Hayground Cove

, an excellent hedge fund run by former retail analyst Jason Ader. One of Ader's most recent successes has been with


(DENN) - Get Free Report

, a stock I wrote about a year ago when he was accumulating shares. He also won big recently on the buyout of

Harrah's Entertainment

( HET). More recently, he's accumulated a 5.5% stake in

Isle of Capri Casinos



RadioShack also makes

Fortune Magazine's

list of

Top 10 Stocks to Own for 2007

, a portfolio we track on Stockpickr. In noting that Olstein owns the stock,



Given RadioShack CEO Julian Day's reputation as a shrewd cost-cutter -- at Kmart he turned a $5 million quarterly loss into a $155 million profit in one year -- Olstein believes RadioShack can grow earnings from a projected 73 cents a share this year to $2 or more by 2008 or 2009. Apply a market multiple to $2 a share in earnings, and you get $35 -- double the current stock price. And RadioShack is the kind of fixer-upper private-equity firms love to buy.

Other stocks on the


list include

Southwest Airlines

(LUV) - Get Free Report



(MSFT) - Get Free Report


I believe Jim Cramer's idea that the analysts will eventually correct themselves is dead right. If the stock keeps going up they are going to be scrambling over themselves to upgrade. For the full list of stocks where the analysts are most likely going to reverse themselves, check out our

Mad Money Contrarian Plays


Stockpickr tip of the day

: Typing "contrarian" into the Stockpickr search engine yields the following results:

  • Contrarian Capital, a very good value fund that occasionally goes activist.
  • Morningstar's Contrarian portfolio. From the description: "We've found 10 stocks for investors who aren't afraid to go against the crowd. "We determined our 2007 contrarian in three steps. First, we identified all of our stocks with 5-star ratings -- there were 78 in total. Second, we reduced this list to only those that had total returns at least 25% lower than the S&P 500 (translating to a -9% or worse total return) during the previous 12-month period, thus narrowing our list to 42 names. Lastly, we chose the 10 'least popular' stocks from this group."
  • User Aufbruch Holdings' Contrarian Value portfolio.

At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of

Trade Like a Hedge Fund


Trade Like Warren Buffett

. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;

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