(B)(N) RSH RadioShack Corporation

Deal Book. RadioShack is iconic, employs over 34,000 people, and has been in business since 1899, and although we don’t have a clear recollection of that time, it would be about the time that radios, telegraphs, telephones and ticker tapes were just beginning to appear in homes and offices in Boston and New York.

It’s been off our investment list for a while (please see Exhibit 1 below) but the company still has investors and more than 4,000 electronics retail stores in the United States, Canada, Europe, South America and Africa, and is one of the top retailers in wireless, offering AT&T, Sprint, Verizon and Boost Mobile phone and carrier options.

Moreover, its debt holders are continuing to work with the company and its new management, so we thought that it might be helpful to “forget the past” and look to the future as if the company was just a startup at the current stock prices (Reuters, October 3, 2013, Exclusive: RadioShack gets new financing offers – sources). Please see Exhibit 2 below.

Exhibit 1: (B)(N) RSH RadioShack Corporation – Risk Price Chart

(B)(N) RSH RadioShack Corporation

RadioShack Corporation is involved in the retail sale of consumer electronics goods and services through its RadioShack store chain.

(Please Click on the Chart to make it larger if required.)

From the Company: RadioShack Corporation engages in the retail sale of consumer electronics goods and services through its RadioShack store chain. The company operates in two segments, U.S. RadioShack company-operated stores and Target Mobile centers. The U.S. RadioShack company-operated stores segment offers postpaid and prepaid wireless handsets, prepaid wireless airtime, tablet devices, and e-readers; home entertainment, wireless, computer, and music accessories, as well as general purpose and special purpose power products, headphones, technical products, and services; and laptop computers, personal computing products, digital music players, residential telephones, global positioning system devices, cameras, digital televisions, and other consumer electronics products. The Target Mobile centers segment offers wireless handsets with activation of third-party postpaid wireless services. As of December 31, 2012, it operated 4,395 company-operated stores under the RadioShack brand name in the United States, Puerto Rico, and the United States Virgin Islands; 1,522 Target Mobile centers; 269 company-operated stores under the RadioShack brand, 6 dealers, and 1 distribution center in Mexico; a network of 1,008 RadioShack dealer outlets, including 32 located outside North America. The company also sells its products through Website, radioshack.com. RadioShack Corporation was founded in 1899, has 34,500 employees, and is headquartered in Fort Worth, Texas.

Exhibit 2: (B)(N) RSH RadioShack Corporation – Risk Price Chart – Startup Scenario

(B)(N) RSH RadioShack Corporation – Startup 2012

We could buy in to this on a risk averse basis, duly noting that this same company was trading at $20 three years ago and had about the same balance sheet as it does today.

(Please Click on the Chart to make it larger if required.)

But, obviously, there is a new crop of different investors who are willing to buy and hold this stock at prices above $2 and above our best estimate of the price of risk, the Risk Price (SF), which is about $3 and rising in this “restructured” and possibly “hypothetical” example.

The company doesn’t pay a dividend at the present time, but could probably help itself to a better stock price if it thought about doing that.

Our estimate of the downside in the stock price due to the demonstrated volatility in the past year is minus ($0.75) per share per quarter so that it could trade off its current price of $3.25 in the range of $3 to $4 without surprise, pending the upcoming shopping season.

We can set the stop/loss at $3 or buy the January put at $3 for $1.15 per share today, and roll it forward and up, or sell it, if “all things awesome” works out.

Courtesy: RadioShack Corporation

For more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100.

Postscript

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