Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Can you beat 50% per month? -- Ignore unavailable to you. Want to Upgrade?

To: JD who wrote (10738)	4/11/2007 10:38:07 AM
From: Smiling Bob	Read Replies (1) \| Respond to of 19257

Cramer is shameless and unrelenting with the RSH pumping. But at least now he's admitting he's trying to help his excellent hedge fund buddies. Wonder if this combined with his recent confession might spur an investigation. Lots of hits and CNBC ties google.com google.com -- Stockpickr: 10 Stocks Wall Street Hates By James Altucher RealMoney.com Contributor 4/11/2007 7:46 AM EDT URL: thestreet.com 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. The 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. RadioShack (RSH) 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 Tyco (TYC) and even tech giant (and now deep-value play) Cisco (CSCO) . 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 Denny's (DENN) , 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 (ISLE) . 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, Fortune says: 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 Fortune list include Southwest Airlines (LUV) and Microsoft (MSFT) . 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 portfolio. 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.