Trading Radio Shack Stock - Bought RSH on Missed Earnings
- 3/18 How Much I Lost
- 3/17 Sold SYMC
- 3/16 Sold GM
- 3/15 Sold MU
- 3/14 Bought GM
- 3/11 Sold IOM
- 3/10 Bought MU
- 3/9 Bought SYMC
- 3/8 Bought IOM
- 3/7 Sold WDC and MU
- 3/4 Bought WDC
- 3/3 Sold ELN and CRNT
- 3/2 Sold RSH
- 3/1 Sold AMZN
- 2/28 Bought ELN
- 2/25 Sold ATI
- 2/24 Bought AMZN
- 2/23 Bought CRNT
- 2/22 Bought ATYT
- 2/18 Bought AMD
- 2/17 Bought RSH
- 2/16 Sold SKE
- 2/15 Bought SKE
- 2/14 Bought MU
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Copyright 2005 by Morris Rosenthal
All Rights Reserved
Today's trade falls under the "10% is overdone" system. I bought 100 shares of Radio Shack (RSH) for $30.14, immediately after CNBC identified it as the losing stock of the hour. RSH closed at $3.37 yesterday, so it was down over 10% when I bought it. Radio Shack reported same store sales up, growth up, healthy profits. This is a company with a P/E just over 15 (not so bad these days) that paid a $0.25 dividend (a little under 1%). This huge drop came on five times the normal volume, despite institutional ownership ownership at a healhy 75%.
So what changed between yesterday and today? Well, the street apparently expected a penny or two more on the quarter an a nickle or dime more on the year. Does a ten cent miss in earnings expectations on a company with $2.02 in earnings justify a 10% fall in market cap? I could see a 5% drop if you ignored dividends and were valuing the company strictly on earnings, but maybe they just have more realistic expecations than most. They announced plans to streamline store operations by removing commodity type products from the shelves and selling them over the Internet instead. Radio Shack is a huge player in the consumer wireless market, which is expected to grow, grow, grow, so the real problem was falling gross margins.
| Symbol/Index | # Shares or Cash | Purchase Price | Day High | Day Low | Today's Change | Closing Price | Closing Value |
| MU | 500 | $11.54 | $11.79 | $11.46 | -0.30 | $11.50 | $5,750 |
| RSH | 100 | $30.14 | $31.25 | $29.75 | -3.44 | $29.93 | $2,993 |
| Portfolio1 | $16,266 | N/A | -$5.00 | N/A | $25,009 | ||
| Dow Jones (DIA) | 230.251 | $108.45 | $108.56 | $107.67 | -0.72 | $107.73 | $24,834 |
| S&P 500 (SPY) | 206.254 | $121.21 | $121.30 | $120.22 | -0.94 | $120.27 | $24,806 |
| Nasdaq (QQQQ) | 658.241 | $37.98 | $38.14 | $37.43 | -0.51 | $37.47 | $24,664 |
1Portfolio balance is after all trading costs in SEP brokerage account with BrownCo
As the index funds show, it was a tough day for the markets in general with the NASDAQ taking the brunt, and I think I timed the RSH buy pretty darned good however it does in the coming days. It basically dropped like a rock out of the gate, recovered around a dollar, then dropped again all in the first hour, after which I bought it. After that, it slowly climbed into the afternoon then dropped again towards the close. If the whole market hadn't tanked, I think it would have made out OK, since that seems to be the rule with stocks that over-sell on the open. Also, I was hugely relieved to see SKE close down over a dollar today at $35.00, after I sold out prematurely at $34.96 yesterday.