Why Radio Shack Corp. Stock Jumped

Why Radio Shack Corp. Stock Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Radio Shack were coming in clearer today, gaining as much as 21% and finishing up 17% on a news that a hedge fund took a stake in the struggling retailer.

So what: Jamie Zimmerman's LiteSpeed Management reportedly acquired an 8.1% chunk of the electronics retailer on Friday. Though the news is a few days old, it didn't seem to hit Wall Street until today, and shares spiked as investors saw the move as a needed confidence boost for Radio Shack. The jump was likely helped by Zimmerman's sterling reputation for outperforming the market and as a specialist in turnaround plays.

Now what: While Zimmerman's purchase is a positive sign for Radio Shack, the deck seems increasingly stacked against the once-strong electronics seller, as it's lost nearly $2 per share over the last year. Like Best Buy and other competitors, the company has simply become a victim of changing times, as online retail has risen and individual items that were once Radio Shack's top sellers are now easily performed by smartphones. Considering that this holiday season was a dismal one for retailers and a number of Radio Shack's peers in particular reported poor holiday sales, we could see a bloodbath when Radio Shack delivers fourth-quarter earnings next month.

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