It may be hard to believe, but one well-known name was up 22 percent yesterday on five times its normal average volume; and it wasn't Apple, Netflix, or Facebook. It was none other than RadioShack, a well-past its prime company that finally showed a little life after a free fall of massive proportions. In fact, whenever I hear Tom Petty's song "Free Fallin' " I can't help but be reminded of RadioShack.
Companies often get hurt for good reasons; in RadioShack's case it's been declining revenue and margins resulting from very stiff competition in retail electronics. Net profit margins that were in the 5-plus-percent range fell to 1.6 percent in 2011, and are now negative on a trailing 12-month basis. Free cash flow, which has been positive for several consecutive years, has also gone negative on a trailing 12-month basis.
This was a company that has been difficult to be interested in. As shares fell from the $23 range in October 2010, to $7 the following March, I began to see other value investors becoming intrigued, and taking positions. It simply was not "cheap" enough for me at that point. My view of RadioShack was still sour; I viewed it as the older style electronics store that I'd rarely, if ever, set foot in.