RadioShack – There’s something happenin’ here, what it is ain’t exactly clear

I wrote a post about radio shack two years ago, wondering how they could compete long-term and being skeptical of their prospects.  Their stock was trading at $17, on a high after Julian Day took over the reigns and was promising a turnaround.  Now, 23 months later, the stock is at $11 and, to be honest, I’m still just as skeptical about the likelihood RadioShack will be around 5 years from now.  Despite trouble with their business model, there is something going on at RadioShack stores and its a good thing for the Consumer.

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Radio Shack seems to be deeply discounting many items in their store, bringing local prices down to match some of the best online prices.  This is great for consumers if they happen to discount the item you are looking for.  I’ve been to my local RadioShack twice in the last week, browsing for Christmas items.  I found a 10.4″ SmartParts digital picture frame for $99, the same price as Amazon.com and steeply off the $248 list price.

In addition to the picture frame (which they had just sold out of), most of their radio controlled toys (great gifts for kids) were 50% off.  GPS device prices rivaled those that I saw as promo sales on Black Friday.  I even saw a brand new 17″ flat panel LCD for $109.99, at least $50 less than a similar unit at Staples or OfficeMax.

I can’t imagine RadioShack is going to make any significant profit on these items which means I still don’t think they can stick around for very much longer, but its a great way to get people into the store and an even better way to rebuild their brand as a great, super-local alternative to Best Buy, Target and Costco.

If you haven’t stopped by your local RadioShack lately, it might be worth swinging in.  Let me know your opinion on Radio Shack,  think they have a sound future ahead of them?

The second big drop

It seems as though we’ve hit a second big drop in the market. We had a good bump last week due to the election results, but my portfolio is now hitting fresh new lows once again.

Selling at the bottom is an ‘amateur’ play, but nobody knows where the bottom is exactly.

Not sure whether to buy or sell at these levels for a 6 to 18 month investment window. Retirement acct will be fine, but what is the right thing to do with cash right now?

Where is the bottom?

Where is the bottom in this market? Of course company earnings will suffer with a credit crunch and lower consumer spending. Lower earnings means a drive to cut costs, which will mean layoffs. The threat of layoffs will mean consumers spending less. Consumers spending less means lowers corporate earnings… See a cycle here?

Now, the million (or trillion) dollar question…what will break the cycle?

When will Omniture get acquired?

 

Omniture just reported earnings for Q3 2008. Revenue was up 108%. They are still turning in losses quarter after quarter, but that will turn around with time. They are still a new company. What really matters is where they sit in the market. I think they’ll be acquired in the next 12 months, or their stock is going to go through the roof.

Their stock right now is trading around $11/share. They traded as high as $38.50 over the last 52 weeks. Their stock has suffered due to losses and a flight to quality in the market (and a healthy dose of irrational exuberance that got them to $38/share in the first place), but their market dominance is getting stronger by the day.

Omniture is a web analytics company. They get a small amount of revenue every time someone visits a page on one of their customer sites. Yes, its a tiny fraction of a cent for every page view but, last quarter, they served 939 billion transactions. People sold their stock, not sure if they could weather a tightening of the purse strings by the tech companies but, the truth is, no company can afford to get rid of omniture. Without it, you have no way to know how your customers use your site, where they come from, why they purchase or don’t purchase, etc. Omniture is the window into your web server’s soul.

Last quarter alone, they signed on 250 new customers. Doesn’t sound like much right, just 250 customers? Yes, yes it is, those customers were (among others): Hershey, Coach, Equifax, IKEA, and Saab. These guys are huge and they’re going to be paying Omniture for a very long time.

Google has their Google Analytics software. Its free, it works fine for small customers. Their service goes up and down without warning, offers no sophisticated reporting tools and has no significant integration points into other pieces of software. Omniture is the enterprise solution and they bring in a lot of money because of it.

Omniture is a fairly new company, but it seems they are ripe for a takeover. With a nearly 75% haircut in their stock price, they are a screaming bargain right now and when Google, Microsoft and the other big tech players are sitting on hoardes of cash, Omniture seems like a great takeover candidate in the next 12 months or so.

Making a difference through local scholarships

I’ve been giving some thought lately on how to give back effectively, how to contribute a relatively small amount and make a large difference for someone.

There are a lot of great charities out there, many of which have very little in the way of operating costs that eat up your donations.  The operating costs aren’t what I’m worried about.  What I want is highly localized charities that make a difference.

My thought over the past few weeks was to start contributing money into an account over time with the interest from the account going toward annual scholarships for my hometown high school.  While I can’t contribute a lot, $1000 a year would be $10000 in ten years, meaning it would throw off $400/year in interest to help a needy kid pay for books or a portion of tuition.  Unfortunately, I realize that the cost of tuition will likely increase more than the 4% a year that the fund would grow (at a fairly optimistic CD rate of 4% or so). 

This got me thinking on a much larger scale.  I made a pittance last year in interest on my savings account.  Even if I efficiently moved all of my money out of my checking and into my savings to optimize interest, I’d be looking at a paltry return of a percent or so per year.  Maybe $100-$200/year at the most.  This concept really needs scale.  What if local bank branches offered members the option to contribute the interest on their accounts to a charity, to be chosen by the account holder?  $50/year from me wouldn’t make much of a difference at all, but $50/year from the 200 people I graduated with would be $10000 which would go a long way to get an under-privileged kid in the community through 4 years of college at an in-state university.  The banks would get great PR and maybe even the benefit of holding all that interest in an account until it was dispersed, I wouldn’t miss my $50/year and I could write it off my taxes and a local kid in the community would have a life-changing gift.  Seems like a great idea to me.

Way to go out on a limb there UBS

UBS analyst Benjamin Schachter lowered his price target on Google today to $525/share.   He lowered his targets on Yahoo from $28 to $20/share and eBay from $28 to $18/share.

Sounds like a strong indictment on tech stocks right?  Schachter is putting himself on the line, making a bold prediction that the prices on these stocks will drop right?  Wrong.

Ebay, his closest target is already 8% below his target.

Yahoo, is already down to $13.

Google is at $330/share.

What is the point of these targets, shouldn’t targets be an attempt at a ‘future’ price point and not purely a representation of a midpoint between where they were and where they actually are now?  If Schachter really believes the Yahoo target is $20/share, he should be buying by the truckload, thats a %50 premium over where the stock is trading today.  Same with Google, over a 50% run up would be required to get to Schachter’s new target. 

Seems like rubbish to me.  If you’re going to publish a target, publish a target that makes sense.  If you’re down on Google/Yahoo/Ebay, it doesn’t make sense to target a price above where they are trading today.  Wall Street is bizarre.

Wamu sold for 2 billion, but JP Morgan wrote down 31 billion in bad debt?

I’m confused by the wamu/jp morgan. JP Morgan paid 1.9 billion for Wamu retails banks and deposits but apparently had to take a 31 billion dollar write down.

How can that be? Did they assume 31 billion in bad debt? Who takes ownership of the 300 billion in Wamu mortgages?

Confusing stuff, smells fishy to me.

Adding to my position in Taser, what are your thoughts?

Yesterday I bought some more Taser.  Maybe I’m digging myself into a hole, but I think this company’s technology could be a major part of the future of law enforcement and military weaponry and I can’t believe they are trading for as little as they are.

  • They have a strong brand (Does “Don’t tase me bro!” ring a bell?)
  • They consistently get new orders from law enforcement agencies all over the US
  • Historically, the vast majority of their revenue has been from domestic sales, but international sales are starting to ramp up
  • They have no significant competition

This missed earnings back in mid-April which, understandably, will shake investors a bit but the stock price has fallen nearly 50% since then.  They were found partially liable for a death in Canada recently where a man died after being tased but, the question is, as the company starts to document the risks of the devices more accurately and law enforcement learns the proper situations in which to use them, will the lawsuits cause irreparable harm to Taser?  I think not.

Police use GUNS today.  Guns kill people.  Gun manufacturers, unless negligent in some way, aren’t liable in every murder case for providing a deadly weapon.  Tasers aren’t a toy, they shouldn’t be used lightly but, from the reports I’ve read, police have nothing but good to say about the Tasers.  If given a choice between shooting someone (which may very likely kill them or cause permanent injury) and Tasing someone (which, generally, causes no lasting impact), I see a huge potential for law enforcement to use Taser’s as a replacement for many of the cases in which guns would normally be used.

I really believe in the potential for this technology and company.  If you see a different perspective, please, leave me a comment!

Down 28% in 6 months

It is times like this when I can see how folks get spooked by the market, sell at the bottom, and remain soured on investing for the long term.  I know its in my best interest to hang in there and perhaps even buy at these levels, but its tough!

My cash account with Scottrade has lost 28% in the last 6 months.  I’ve been making an attempt to unload the losers in an effort to reinvest that money in stocks I think will do better over the coming months.  Even though I am buying the new stocks at depressed prices, I can’t help but be a bit shaken up over how things are faring.

What about the rest of you?  Are you holding on through the weakness, liquidating positions (even at a loss) to get out of this, or buying right now as much as you can to take advantage of the low prices?