Value-oriented Equity Investment Ideas for Sophisticated Investors

A Monthly Publication of BeyondProxy LLC  Subscribe at manualofideas.com

“If our efforts can further the goals of our members by giving them a discernible edge
over other market participants, we have succeeded.”

Investing In The Tradition of

Graham, Buffett, Klarman
Year IV, Volume III
March 31, 2011
SMALL- AND MICRO-CAP VALUE
When asked how he became so
successful, Buffett answered:
“We read hundreds and hundreds
► 11 small- and micro-cap investment screens
of annual reports every year.”
► 20 companies profiled and analyzed
Top Ideas In This Report
► Proprietary selection of top investment candidates
► Plus: Superinvestor holdings update
RadioShack
(NYSE: RSH) …………………….. 80 ► Plus: Interview with Guy Spier
► Plus: Interview with Rahul Saraogi

Companies mentioned in this issue include

Also Inside
Editorial Commentary ………………. 4
Superinvestor Update ………………. 8
Interview with Guy Spier …………… 9
Interview with Rahul Saraogi …….. 18
Screening for Small-Cap Ideas …… 22
Analysis of 20 Companies ………… 36
This Month’s Top Web Links …….. 116
About The Manual of Ideas
Our goal is to bring you investment
ideas that are compelling on the
basis of value versus price. In our
quest for value, we analyze the top
holdings of top fund managers. We
also use a proprietary methodology
to identify stocks that are not widely
followed by institutional investors.
Our research team has extensive
experience in industry and security
analysis, equity valuation, and
investment management. We bring a
“buy side” mindset to the idea
generation process, cutting across
industries and market capitalization
ranges in our search for compelling
equity investment opportunities.
A. H. Belo, Aegean Marine Petrol, Alliance One, Barnes & Noble,
Benchmark Electronics, Boyd Gaming, Cache, Callaway Golf,
Canadian Solar, Charming Shoppes, Charming Shoppes, Chiquita,
CIBER, Citizens Republic, Coldwater Creek, CONN’S, Corinthian Colleges,
Cross Country Health, CSS Industries, Donegal Group, Doral Financial,
E.W. Scripps, Eagle Bulk Shipping, Eastman Kodak, EMC Insurance,
Exceed Company, Exterran Holdings, FBR Capital Markets,
Fresh Del Monte, Gaiam, Genco Shipping, GenOn Energy,
Gibraltar Industries, GigaMedia, Green Plains Renewable Energy,
Hallmark Financial, Hawaiian Holdings, Horace Mann Educator,
Hutchinson Technology, Imation, Imperial Sugar, Jones Apparel,
Kindred Healthcare, Leap Wireless, Liz Claiborne, Luby’s, Lydall,
Maiden Holdings, MarineMax, Meadowbrook Insurance, MedCath,
Medical Action Industries, Movado, Navios Maritime, Ness Technologies,
Northstar Realty, Northwest Pipe, Novatel Wireless, Office Depot,
PC Connection, Penson Worldwide, PharMerica, PHH, Phoenix Companies,
Princeton Review, RadioShack, Republic Airways, REX American,
Rosetta Stone, RTI Biologics, SeaBright Insurance, SkyWest,
Standard Pacific, Sterling Construction, Stewart Information Services,
SureWest Communications, Sycamore Networks, Syms Corp.,
Trident Microsystems, Triple-S Management, Tuesday Morning,
Ultrapetrol, United Fire Casualty, USEC, West Marine, Willbros Group,
Winn-Dixie Stores, Xyratex, ZipRealty, and more.
(analyzed companies are underlined)

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 Value-oriented Equity Investment Ideas for Sophisticated Investors

Table of Contents

EDITORIAL COMMENTARY ..........................................................................4

SUPERINVESTOR HOLDINGS UPDATE ......................................................8

INTERVIEW WITH GUY SPIER ......................................................................9

INTERVIEW WITH RAHUL SARAOGI ........................................................ 18

BROWSING FOR SMALL- AND MICRO-CAP OPPORTUNITIES ............. 22

CHEAPEST SMALL- AND MICRO-CAPS, BASED ON TANGIBLE BOOK VALUE TO MARKET VALUE ..... 22
CHEAPEST SMALL- AND MICRO-CAPS, BASED ON TRAILING EBIT TO ENTERPRISE VALUE ........... 24
SELECTED SMALL- AND MICRO-CAPS TRADING CLOSE TO 52-W EEK LOWS ............................... 26
“MAGIC FORMULA,” BASED ON TRAILING OPERATING INCOME (MV < $2 BILLION)........................ 28
“MAGIC FORMULA,” BASED ON THIS YEAR’S EPS ESTIMATES (MV < $2 BILLION) ........................ 29
“MAGIC FORMULA,” BASED ON NEXT YEAR’S EPS ESTIMATES (MV < $2 BILLION) ....................... 30
VALUE WITH CATALYST: CHEAP REPURCHASERS OF STOCK (MV < $2 BILLION).......................... 31
PROFITABLE DIVIDEND PAYORS WITH DECENT BALANCE SHEETS (MV < $2 BILLION) .................. 32
DEEP VALUE: LOTS OF REVENUE, LOW ENTERPRISE VALUE (MV < $2 BILLION) ......................... 33
DEEP VALUE: NEGLECTED GROSS PROFITEERS (MV < $2 BILLION) ........................................... 34
ACTIVIST TARGETS: POTENTIAL SALES OR RECAPITALIZATIONS (MV < $2 BILLION)..................... 35

20 SMALL- AND MICRO-CAP INVESTMENT CANDIDATES .................... 36

CACHE (CACH) – MICHAEL PRICE, IRONWOOD, MILL ROAD, RENTECH..................................... 36
CHARMING SHOPPES (CHRS) – OMEGA, ROYCE, CRESCENDO, CLEARBRIDGE ......................... 40
COLDWATER CREEK (CWTR) – KORNITZER, GAMCO, ROYCE .................................................. 44
EASTMAN KODAK (EK) – LEGG MASON, PRIMECAP................................................................. 48
GENON ENERGY (GEN) – T. ROWE, PAULSON, ORBIS, OWL CREEK, SASCO............................. 52
HAWAIIAN HOLDINGS (HA) – ACADIAN, CANYON, RENTECH, AQR, LONESTAR .......................... 56
HUTCHINSON TECHNOLOGY (HTCH) – VAN DEN BERG, KENNEDY, RENTECH, GUGGENHEIM ...... 60
LEAP WIRELESS (LEAP) – MHR, CAP RE, PENN, H PARTNERS, PENTWATER, JAT, IRIDIAN ..... 64
LIZ CLAIBORNE (LIZ) – TREMBLANT, ALYESKA, PERRY, ELM RIDGE .......................................... 68
OFFICE DEPOT (ODP) – TIGER CONSUMER............................................................................. 72
PRINCETON REVIEW (REVU) – BLAIR, BURNHAM, BRIDGER, PERIMETER, S SQUARED ............... 76
RADIOSHACK (RSH) – IVORY, LSV, TIGER CONSUMER ........................................................... 80
REPUBLIC AIRWAYS (RJET) – GREENLIGHT, TRAFELET, SENATOR ........................................... 84
ROSETTA STONE (RST) – TIGER CONSUMER, TAMRO, MFC, ARGYLL ....................................... 88
STEWART INFORMATION SERVICES (STC) – PRESCOTT, TOWLE, ARTISAN, IRONBRIDGE ............ 92
SYCAMORE NETWORKS (SCMR) – THIRD AVENUE .................................................................. 96
SYMS (SYMS) – FRANKLIN, KAHN, MICHAEL PRICE ............................................................... 100
WINN-DIXIE STORES (WINN) – RIVER ROAD, CONTRARIUS, PRIVATE ..................................... 104
XYRATEX (XRTX) – ROYCE, T ROWE ................................................................................... 107
ZIPREALTY (ZIPR) – PASSPORT, ANCIENT ART ..................................................................... 112

THIS MONTH’S TOP 10 WEB LINKS ....................................................... 116

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 Value-oriented Equity Investment Ideas for Sophisticated Investors

Editorial Commentary
We devoted our January issue to large-cap value investment ideas, highlighting
such household names as Cisco Systems (CSCO), Pfizer (PFE) and Travelers (TRV).
This month, we travel to the other end of the market capitalization spectrum, aiming
to uncover opportunities among companies with market caps of less than $2 billion.
The names include RadioShack (RSH),

Our team has gained quite a bit of experience in this less widely scrutinized part
of the market over the years. The search for compelling ideas has taken us back to a
few companies we have known for some time but may have passed on due to price
or other considerations. In the November 2008 issue of The Manual of Ideas, we
profiled RadioShack (RSH), a retailer with a tired brand and unimpressive financial
results. RadioShack embarked on a turnaround led by an executive team with
experience at Eddie Lampert’s Kmart/Sears. Fast-forward two-and-a-half years:
RadioShack’s stock price is roughly where stood in late 2008, while the company
has grown same-store sales, transitioned to more attractive mobile products,
generated lots of free cash, and repurchased a large number of shares. In short, the
company has, in our view, become an intriguing and timely opportunity.
Of course, investors in small- and micro-cap public companies are well aware of
the minefield that awaits those who enter uncharted territory in search of value. Over
the past few years, dozens of small companies that trade on U.S. stock exchanges but
operate exclusively in China have passed various value-oriented screens due to their
apparently solid balance sheets and strong earnings. Unfortunately, investors are now
finding out the truth about many of those companies: The founders and sponsors
were often betting on the gullibility of U.S. investors — put “China” in a name, raise
money in an IPO, and then lie your way to an increasing stock price. Scores of
Chinese small-caps have recently been revealed as frauds, hurting not only U.S.
investors but also honest Chinese business owners. We warned about U.S.-traded
Chinese education companies in our July 2009 issue, and we have eliminated most of
those companies from the small- and micro-cap screens in this report.

We find the following small- and micro-caps particularly interesting at this time:

$3.70 per share; MV $2.9 billion)

$40

$35

$30

$25

$20

$15

$10

$5

$0
Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11

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 Value-oriented Equity Investment Ideas for Sophisticated Investors

The recent merger of has created a large,

diversified U.S. producer of wholesale electricity. Fundamental challenges including
low natural gas and, by proxy, power prices mask significant “normalized” earning
power. Investors may also underappreciate the combined company’s diversification
of “fuels” from coal toward more natural gas. will reduce capex related to
environmental obligations starting in 2012.
Trading at 50% of tangible book and an estimated 35% discount to the implied
enterprise value per megawatt capacity of selected peers, shares offer
downside protection and material upside should fundamentals improve in the coal-
fired power generation industry.
John Paulson’s hedge fund owns 7% of having bought shares at
a higher implied price.

RadioShack (NYSE: RSH, $14 per share; MV $1.5 billion)

$45

$40

$35

$30

$25

$20

$15

$10

$5

$0
Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11

RadioShack’s performance has improved markedly over the past three years,
with outgoing CEO Julian Day, formerly of Kmart, deserving much credit.
RadioShack posted a 4% comparable sales increase in 2010 and has been buying
back stock meaningfully below our estimate of fair value, making this one of the
more compelling small-cap ideas we have encountered recently.
A long-term caveat is that consumer electronics retailing remains a business in
which high returns on capital may not be sustainable.
With analysts projecting 2011 and 2012 EPS of $1.72 and $1.87, respectively,
we consider RadioShack a compelling risk-reward at roughly $14 per share.

$13 per share; MV $270 million)

$35

$30

$25

$20

$15

$10

$5

$0
Mar 10 Mar 11

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 Value-oriented Equity Investment Ideas for Sophisticated Investors

Selected Small- and Micro-Caps Trading Close to 52-Week Lows

∆ to Reach Market Enterpr. Book Tang. Trailing Twelve Months’ Em-
52-Week Value Value Value/ Book/ Sales/ GP/ EBIT/ FCF ploy- Ins.
Price Low High ($mn) ($mn) MV MV Enterprise Value Yield ees Own.
OPTI OPTi 2.08 0% 105% 24 3 93% 93% 1533% n/m 1321% 64% 1 10%
TLB Talbots 4.87 0% 265% 343 410 54% 21% 302% 118% 19% 6% 3,400 3%
BKS Barnes & Noble 8.89 0% 178% 536 814 163% -41% 854% 219% -6% -25% 40,000 2%
COIN Converted Organics 0.30 0% 323% 27 27 -65% -72% 12% -1% -57% -123% 46 2%
OCNF OceanFreight 0.64 0% 289% 49 265 478% 478% 39% 21% -68% -417% 6
KANP Kaanapali Land 20.00 0% 30% 36 29 286% 286% 18% -3% n/a -24% 35
CRDE Cardinal Ethanol 3500 0% 324% 51 111 168% 168% 211% 16% n/a 13% 48 1%
OB OneBeacon Insurance 12.80 0% 38% 1,209 1,595 102% 102% 105% -47% n/a -25% 1,500 1%
ARDNA Arden Group 75.67 0% 50% 239 192 33% 33% 218% n/m n/a 7% 1,274
TIS Orchids Paper 11.20 0% 65% 84 102 83% 83% 91% 15% n/a -12% 296 0%
CPLA Capella Education 50.61 -1% 94% 825 632 25% 25% 67% 41% n/a 7% 2,968 6%
TLAB Tellabs 4.99 -1% 89% 1,810 675 103% 86% 243% 117% 27% 11% 3,413 5%
CEP Constellation Energy 2.47 -1% 57% 59 218 344% 344% 84% 68% 7% 63% 136 6%
HGIC Harleysville Group 30.56 -1% 24% 828 946 93% 93% 104% 10% n/a 3% 1,706 2%
ICAD iCAD 1.05 -1% 132% 48 30 133% 31% 87% 75% -11% 9% 99 14%
OSG Overseas Shipholding 30.29 -1% 76% 923 2,636 196% 186% 40% 8% -3% -57% 3,500 1%
RSYS RadiSys Corp. 8.11 -1% 36% 197 118 70% 66% 241% 74% 2% 6% 719 1%
RSH RadioShack 14.10 -1% 70% 1,492 1,562 56% 54% 286% 129% 24% 2% 35,100 1%
MLNK ModusLink 5.17 -2% 78% 226 72 128% 124% 1267% 132% -1% 7% 4,400 2%
FARM Farmer Brothers 10.45 -2% 87% 169 170 86% 73% 262% 106% n/a -3% 2,030 26%
TECUA Tecumseh Products 8.58 -2% 81% 157 157 276% 276% 595% 63% -10% -35% 7,600 0%
VCI Valassis Comms 27.41 -2% 40% 1,386 1,847 38% -25% 126% 33% 12% 30% 6,735 1%
AMRI Albany Molecular 4.16 -2% 116% 126 97 233% 193% 204% 43% -12% -5% 1,266 0%
GAI GlobalTech Appliance 7.40 -2% 69% 24 2 332% 319% 4459% 659% 23% -76% 3,420
MSW Mission West Prop. 6.56 -2% 18% 147 496 97% 95% 20% 15% n/a 38% 6
BEBE bebe stores 5.46 -2% 84% 459 276 77% 77% 179% 70% 0% -16% 1,398 0%
FRO Frontline 24.49 -2% 59% 1,881 4,599 40% 40% 25% 12% 7% -20% 51
CHINA CDC 2.46 -2% 291% 87 67 304% -24% 471% 211% -11% 4% 317
BTH Blyth 30.97 -2% 94% 255 249 94% 88% 370% 206% 21% -1% 2,300 28%
ELNK EarthLink 7.91 -2% 18% 858 465 89% 78% 134% 82% 40% 19% 560 1%
CENT Central Garden & Pet 8.96 -2% 32% 533 843 95% 40% 182% 61% 14% 12% 3,900 1%
GNK Genco Shipping 10.95 -2% 124% 394 1,854 278% 278% 24% 20% 12% -131% 791
ORN Orion Marine 10.59 -2% 87% 286 263 86% 75% 134% 25% 12% -5% 303 1%
SUPX Supertex 20.85 -3% 52% 271 133 73% 73% 65% 34% 12% 6% 350 7%
ICA Empresas ICA 8.65 -3% 32% 1,388 3,583 101% 101% 72% 10% 5% -11% 26,587
PAET PAETEC Holding 3.35 -3% 58% 485 1,345 34% -57% 121% 61% 4% 3% 3,792 6%
MPWR Monolithic Power 13.31 -3% 90% 470 292 53% 53% 75% 42% 12% 5% 889 7%
CEDC Central European 11.58 -3% 245% 804 1,980 195% -64% 36% 17% 5% -5% 4,150 0%
INOD Innodata Isogen 2.50 -3% 79% 63 42 63% 62% 146% 34% -3% 5% 5,060
MMUS MakeMusic 4.64 -3% 51% 23 11 71% 44% 153% 128% 4% 11% 100 0%
ZOOM Zoom Technologies 3.44 -3% 160% 60 98 76% 61% 222% 19% n/a -8% 1,400
BKR Michael Baker 27.83 -3% 49% 257 170 76% 50% 295% 58% n/a 8% 2,517 0%
TRID Trident Microsystems 1.00 -3% 156% 178 85 126% 79% 656% 138% -204% -74% 1,522 1%
FMD First Marblehead 2.00 -3% 104% 202 8,529 159% 136% 2% n/m n/a 94% 393 5%
HTH Hilltop Holdings 9.29 -3% 31% 525 20 125% 118% 662% 105% 46% 1% 134 0%
UEPS Net1 UEPS 9.29 -3% 104% 423 472 79% -10% 62% 45% 18% 8% 2,192 1%
TKLC TEKELEC 7.44 -3% 167% 511 290 119% 74% 146% 87% 9% 1% 1,291 1%
MXL MaxLinear 8.08 -3% 141% 258 164 41% 40% 42% 29% n/a 1% 210 0%
SHIP Seanergy Maritime 0.62 -3% 174% 37 392 736% 690% 24% 16% 5% 76% 3
EMITF Elbit Imaging 11.12 -3% 117% 288 923 72% 67% 35% 11% 0% -32% 240

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 Value-oriented Equity Investment Ideas for Sophisticated Investors

∆ to Reach Market Enterpr. Book Tang. Trailing Twelve Months’ Em-

52-Week Value Value Value/ Book/ Sales/ GP/ EBIT/ FCF ploy- Ins.
Price Low High ($mn) ($mn) MV MV Enterprise Value Yield ees Own.
SKX Skechers 18.46 -3% 143% 890 739 102% 101% 272% 123% n/a -14% 2,517 6%
ESLR Evergreen Solar 1.22 -3% 525% 47 413 -129% -129% 82% -13% -27% -230% 1%
PRGN Paragon Shipping 2.99 -3% 69% 177 460 277% 277% 24% 19% 7% -105% 270
BIOS BioScrip 4.15 -4% 137% 225 531 89% -69% 308% 49% 6% -18% 885 1%
GFIG GFI Group 4.57 -4% 53% 558 378 94% 37% 228% 80% 11% 10% 1,990 42%
BWS Brown Shoe 10.65 -4% 87% 467 689 89% 74% 364% 146% 12% -15% 12,080 4%
NTRI NutriSystem 13.56 -4% 84% 363 352 21% 21% 145% 81% 15% 6% 573 3%
PETS PetMed Express 14.68 -4% 68% 331 259 31% 31% 89% 33% 14% 6% 227 1%
USAK USA Truck 12.15 -4% 55% 128 229 108% 108% 201% 100% 0% 4% 2,900 22%
JNY Jones Apparel 12.36 -4% 100% 1,091 1,427 104% 23% 255% 88% 13% 8% 6,370 3%
NLP NTS Realty 3.33 -4% 65% 38 268 136% 136% 18% 11% n/a -29% 0 0%
PICO PICO Holdings 28.29 -4% 40% 642 573 88% 88% 6% 5% -1% -10% 57 1%
MCEM Monarch Cement 24.75 -4% 23% 63 72 162% 162% 168% 22% 0% 4% 145 0%
AXR AMREP Corp. 9.75 -4% 62% 59 54 151% 124% 187% 26% -3% 17% 1,300
WWE World Wrestling Ent. 12.01 -4% 58% 889 725 36% 36% 66% 28% 11% -6% 585 3%
RSOL Real Goods Solar 2.35 -4% 104% 43 35 74% 73% 222% 62% 6% 3% 200
ICFI ICF International 21.80 -4% 29% 427 509 83% 1% 150% 57% n/a 14% 3,700 3%
BGFV Big 5 Sporting Goods 11.26 -4% 63% 246 292 61% 59% 307% 102% 12% 4% 8,900 1%
PTP Platinum Underwriter 36.29 -4% 28% 1,358 620 140% 140% 159% 60% 84% 0% 144 2%
LWAY Lifeway Foods 8.44 -4% 43% 140 145 25% 11% 43% 15% 5% 3% 200 50%
ALIF Artificial Life 0.68 -4% 109% 43 44 146% 70% 73% 53% 23% -22% 50 14%
HALL Hallmark Financial 8.37 -4% 43% 168 167 140% 96% 183% 62% 10% 20% 321 0%
SCIL Scientific Learning 2.93 -4% 89% 55 40 8% -2% 109% 80% -14% -11% 212 1%
ACU Acme United 9.41 -4% 39% 29 36 88% 88% 176% 65% 8% -11% 134 14%
PAR 3PAR 4.90 -4% 50% 74 71 118% 67% 336% 88% 5% 4% 1,649 19%
BRID Bridgford Foods 11.35 -5% 49% 106 94 34% 34% 125% 48% n/a -3% 530 76%
RST Rosetta Stone 13.19 -5% 108% 277 155 64% 48% 168% 142% 8% 8% 1,084 1%
CWT California Water 35.48 -5% 12% 739 1,202 59% 59% 38% 18% n/a -10% 1,127 2%
KFS Kingsway Financial 1.06 -5% 157% 56 56 269% 182% 553% -601% -254% -997% 2,600
TNK Teekay Tankers 9.68 -5% 44% 587 1,028 75% 73% 14% 13% n/a 0% 0
GSAT Globalstar 1.05 -5% 101% 305 873 180% 180% 8% 3% -5% -92% 332 0%
LLEN L&L Energy 7.22 -5% 107% 232 227 55% 54% 94% 34% n/a 17% 1,400 26%
ENZ Enzo Biochem 3.50 -5% 94% 134 103 69% 35% 95% 43% -14% -10% 527 0%
RMTR Ramtron 2.05 -5% 103% 58 60 63% 58% 117% 61% 6% 7% 109 3%
ACFN Acorn Energy 3.68 -5% 83% 64 58 52% 25% 61% 23% -10% -43% 178 5%
DSWL Deswell Industries 3.06 -5% 74% 48 14 234% 233% 627% 68% n/a -18% 3,474
CBEY Cbeyond 12.19 -5% 48% 379 353 46% 46% 128% 87% -1% 5% 1,913 2%
BCRX BioCryst Pharma 3.44 -5% 143% 155 94 48% 48% 67% 67% -35% -9% 79 1%
EPAX Ambassadors Group 10.25 -5% 23% 185 105 47% 40% 72% 63% 10% 6% 244 2%
AMSC Am. Superconductor 22.84 -5% 70% 1,158 915 43% 39% 44% 17% 7% -1% 714 6%
WEYS Weyco Group 23.47 -5% 14% 267 259 65% 60% 88% 35% n/a -3% 553 11%
RODM Rodman & Renshaw 1.96 -5% 144% 65 14 80% 79% 610% 538% -52% -14% 114 16%
POZN POZEN 4.68 -5% 171% 140 76 43% 43% 90% n/m n/a -4% 31 0%
BMI Badger Meter 38.41 -5% 18% 578 588 29% 22% 47% 17% n/a -1% 1,293 3%
XRTX Xyratex 11.02 -5% 86% 334 243 110% 107% 660% 115% 51% 11% 2,150
CALM Cal-Maine Foods 27.67 -5% 41% 660 605 59% 54% 152% 34% n/a 7% 1,950 23%
GNVC GenVec 0.38 -5% 718% 49 14 66% 66% 119% n/m -91% -21% 90
CHRS Charming Shoppes 3.00 -5% 130% 346 382 128% 67% 530% 263% -11% -20% 6,500 0%
UFCS United Fire Casualty 18.54 -5% 33% 486 306 147% 147% 193% 33% 70% 14% 640 0%
JBSS John B. Sanfilippo 11.77 -5% 38% 125 226 149% 132% 276% 38% 8% 1% 1,350 3%

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 Value-oriented Equity Investment Ideas for Sophisticated Investors

“Magic Formula,” based on This Year’s EPS Estimates (MV < $2 billion)
Companies with high returns on capital employed, trading at high earnings yields (based on this FY EPS estimates)
▼ ▼
Move To This FY EBIT/ Price to Insiders
Price 52-Week MV EV EV/ EPS Capital Tax Tangible % Buys/
Company Ticker ($) Low High ($mn) ($mn) Sales Yield Employed Rate Book Own. Sells
1 * New Energy Systems NEWN 4.17 -2% 121% 52 43 .5x 34% 235% 22% 3.5x 0% -/-
2 ITT Educational ESI 67.74 -26% 80% 1,921 1,758 1.1x 14% infinite 39% >9.9x 0% 12 / 2
3 * inTEST INTT 3.39 -58% 38% 35 30 .7x 23% 141% 1% 2.9x 3% -/3
4 Bridgepoint Edu. BPI 18.02 -29% 53% 957 678 1.0x 13% infinite 41% 4.1x 1% 7/7
5 Lihua International LIWA 9.46 -23% 38% 283 195 .5x 19% 133% 27% 1.8x 48% 2/-
6 Metropolitan Health MDF 4.42 -34% 20% 180 132 .4x 12% 2665% 38% 2.9x 3% 4/4
7 ePlus PLUS 25.72 -36% 18% 218 194 .2x 12% infinite 39% 1.2x 9% 7/8
8 Power-One PWER 8.35 -59% 56% 870 697 .7x 14% 243% 41% 3.3x 2% 2/4
9 Career Education CECO 20.77 -21% 73% 1,607 1,160 .5x 12% 789% 33% 3.7x 0% 7/5
10 * Zoo Entertainment ZOOG 3.87 -14% n/a 24 23 .3x 15% 156% >99% 2.6x 0% 1/-
11 VirnetX VHC 12.47 -68% 60% 618 540 n/m 12% infinite 45% >9.9x 0% 2/3
12 * BioDelivery Sciences BDSI 3.22 -34% 33% 78 55 .8x 11% infinite 1% >9.9x 0% -/-
13 GT Solar SOLR 10.55 -54% 13% 1,318 1,136 1.4x 11% infinite 36% >9.9x 0% 10 / 14
14 * Biostar Pharma BSPM 1.84 -12% 199% 50 33 .5x 34% 78% 29% 1.2x 0% -/-
15 * ZST Digital Networks ZSTN 5.96 -26% 58% 70 46 .3x 37% 74% 27% 1.0x 40% 1/-
16 * IDT Corp. IDT 23.69 -74% 27% 545 327 .2x 11% infinite 6% 2.9x 13% 6/1
17 Exceed Company EDS 6.83 -14% 53% 134 39 .1x 27% 78% 8% .6x 0% -/-
18 Nephros NEP 4.56 -39% 121% 135 77 .8x 22% 82% 20% 1.2x 23% -/2
19 * China Electric Motor CELM 3.07 -1% 222% 67 31 .3x 28% 72% 27% 1.0x 0% -/-
20 Kulicke and Soffa KLIC 8.60 -39% 23% 614 511 .7x 14% 104% 2% 2.2x 2% 14 / 12
21 Lincoln Educational LINC 14.77 -34% 91% 331 354 .6x 13% 117% 41% 3.0x 5% 9/8
22 * Vertro VTRO 3.50 -52% 107% 25 19 .5x 10% infinite n/m 6.0x 9% 6/6
23 Veeco Instruments VECO 48.06 -39% 13% 1,952 1,417 1.5x 11% 248% 4% 2.8x 1% 4/6
24 China Valves CVVT 5.26 -3% 182% 188 167 .9x 30% 66% 25% 1.4x 0% -/-
25 * LTX-Credence LTXC 8.45 -41% 34% 418 293 1.1x 13% 101% n/m 2.8x 2% -/5
26 Gulf Resources GFRE 7.01 -10% 74% 244 175 1.1x 26% 65% 26% 1.3x 14% 6/1
27 SkyPeople Juice SPU 4.37 -10% 69% 112 76 .9x 21% 66% 31% 1.1x 0% -/-
28 America’s Car-Mart CRMT 24.37 -16% 24% 258 316 .9x 10% 192% 37% 1.4x 1% 1/1
29 China Ceramics CCCL 6.62 -24% 53% 109 80 .5x 36% 58% 26% .8x 0% -/-
30 * LGL Group LGL 13.91 -72% 150% 31 28 .6x 28% 61% n/m 1.7x 13% 9/2
31 Actuate BIRT 4.83 -18% 26% 222 183 1.4x 10% infinite 26% 7.2x 4% 6/7
32 SciClone Pharma SCLN 3.94 -47% 14% 188 135 1.7x 12% 97% 4% 2.4x 0% -/-
33 Xyratex XRTX 11.02 -5% 86% 334 243 .2x 20% 61% n/m .9x 0% -/-
34 * Primoris Services PRIM 9.14 -39% 9% 451 413 .4x 10% 126% 40% 6.1x 3% 3/2
35 * PMC-Sierra PMCS 7.60 -10% 28% 1,773 1,676 2.6x 9% infinite 27% 6.0x 0% 5/8
36 * Amtech Systems ASYS 21.54 -62% 43% 203 150 .9x 10% 99% 39% 2.4x 2% 8/7
37 * Entropic Comms ENTR 7.55 -44% 85% 644 498 2.4x 11% 69% n/m 2.6x 0% 8/8
38 * Integrated Silicon ISSI 8.92 -27% 56% 237 163 .6x 14% 57% 1% 1.3x 0% 1/1
39 * Synaptics SYNA 26.85 -11% 26% 910 696 1.2x 9% 126% 11% 2.9x 0% 6/6
40 * Evolving Systems EVOL 6.91 -10% 21% 74 64 1.7x 9% 413% 12% 5.8x 2% 5/2
41 Cornerstone CRTX 5.80 -13% 31% 149 98 .8x 11% 70% n/m 3.2x 56% 2/3
42 Medicis Pharma MRX 29.92 -30% 9% 1,818 1,283 1.8x 8% infinite 40% 3.4x 1% -/2
43 Amedisys AMED 35.73 -36% 80% 1,054 1,115 .7x 9% 173% 39% >9.9x 1% -/3
44 * Advanced Battery ABAT 3.67 -18% 19% 281 169 1.7x 16% 48% 16% 1.5x 0% -/1
45 * Full House Resorts FLL 3.66 -39% 37% 66 53 1.6x 9% 171% 24% 2.8x 3% 1/2
 Company website SEC Y! Price Charts Proxy Y!
* New additions are highlighted.

Screening criteria: ► MV < $2 billion ► ADRs and banks excluded ► Enterprise value to MV < 1.5

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 Value-oriented Equity Investment Ideas for Sophisticated Investors

RadioShack (RSH) – Ivory, LSV, Tiger Consumer

Services: Retail (Technology), Member of S&P 500 Fort Worth, TX, 817-415-3011 radioshackcorporation.com
Trading Data Consensus EPS Estimates Valuation
Price: $14.10 (as of 3/18/11) Month # of P/E FYE 12/31/10 8x
52-week range: $13.90 - $24.00 Latest Ago Ests P/E FYE 12/31/11 8x
Market value: $1.5 billion This quarter $0.36 $0.39 14 P/E FYE 12/30/12 8x
Enterprise value: $1.6 billion Next quarter 0.40 0.43 14 P/E FYE 12/30/13 6x
Shares out: 105.8 million FYE 12/31/11 1.72 1.80 16 EV/ LTM revenue 0.3x
Ownership Data FYE 12/30/12 1.86 1.95 14 EV/ LTM EBIT 4x
Insider ownership: <1% FYE 12/30/13 2.24 2.32 2 P / tangible book 1.9x
Insider buys (last six months): 8 LT growth 8.0% 8.0% 2 Greenblatt Criteria
Insider sales (last six months): 6 EPS Surprise Actual Estimate LTM EBIT yield 24%
Institutional ownership: 92% 2/22/11 $0.51 $0.53 LTM pre-tax ROC 45%

Operating Performance and Financial Position

($ millions, except Fiscal Years Ended December 31, LTME FQE FQE
per share data) 2004 2005 2006 2007 2008 2009 2010 12/31/10 12/31/09 12/31/10
Revenue 4,841 5,082 4,778 4,252 4,225 4,276 4,473 4,473 1,318 1,368
Gross profit 2,435 2,267 2,129 2,026 1,923 1,963 2,011 2,011 579 561
Operating income 560 350 157 382 322 369 375 375 132 103
Net income 337 267 73 237 189 205 206 206 76 57
Diluted EPS 2.08 1.81 0.54 1.74 1.47 1.63 1.68 1.69 0.60 0.51
Shares out (avg) 161 148 136 135 129 125 121 121 126 110
Cash from operations 353 363 315 379 275 246 155 155 122 (2)
Capex 229 171 91 45 86 81 80 80 19 33
Free cash flow 123 192 224 334 189 165 75 75 103 (35)
Cash & investments 438 224 472 510 815 908 569 569 908 569
Total current assets 1,775 1,627 1,600 1,567 1,792 2,016 1,779 1,779 2,016 1,779
Intangible assets 47 40 8 5 37 39 41 41 39 41
Total assets 2,517 2,205 2,070 1,990 2,254 2,429 2,175 2,175 2,429 2,175
Short-term debt 56 41 195 61 39 42 357 308 42 308
Total current liabilities 957 986 984 748 637 655 908 908 655 908
Long-term debt 507 495 346 348 660 628 332 332 628 332
Total liabilities 1,595 1,616 1,416 1,220 1,393 1,381 1,333 1,333 1,381 1,333
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 922 589 654 770 861 1,048 843 843 1,048 843
EBIT/capital employed 52% 35% 19% 54% 47% 51% 44% 45% n/m n/m
Ten-Year Stock Price Performance and Trading Volume Dynamics

$45

$40

$35

$30

$25

$20

$15

$10

$5

$0
Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11

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 Value-oriented Equity Investment Ideas for Sophisticated Investors

BUSINESS OVERVIEW SELECTED OPERATING DATA

RadioShack retails consumer electronics in North America. FYE December 31 2005 2006 2007 2008 2009 2010
The company, founded in 1967, employs 35,000 people. ∆ sales +5.0% -6 0% -11.0% -0.6% +1.2% +4.6%
∆ comparable sales +0.9% -5.6% -8.2% -0.6% +1.3% +4.4%
Seasonality is strongest during the Q4 holiday season,
% of revenue by segment:
accompanied by a pre-seasonal inventory buildup. Company stores 88% 85% 86% 85% 85% 85%
Kiosks 5% 7% 7% 7% 6% 6%
INVESTMENT HIGHLIGHTS Other 7% 7% 7% 8% 9% 9%
Sales growth by major segment:
• 4,700 company-operated stores in the U.S. and Company stores 0% -9% -11% -1% 1% 4%
Mexico, 1,265 mobile phone kiosks in the U.S., Kiosks 370% 30% -13% -5% -12% 9%
and 1,220 dealer outlets worldwide. Stores are Number of locations (period end):
located in major malls and strip centers, as well as Company stores1 4,972 4,467 4,447 4,653 4,680 4,697
Dealer, other outlets 1,711 1,596 1,484 1,411 1,321 1,219
individual storefronts. Each store sells private-label Kiosks2 777 772 739 688 562 1,267
and third-party branded electronics, including Total locations 7,460 6,835 6,670 6,752 6,563 7,183
mobile and wireline phones, TVs, DVD players, etc. Change (y-y) 0% -8% -2% 1% -3% 9%
• Sales and comparable sales up 4.6% and 4.4%, EBIT margin by segment:
Company stores 20% 17% 21% 20% 19% 18%
respectively, in 2010, driven by growth in the Sprint Kiosks -5% -7% 5% 3% 6% 8%
and AT&T postpaid wireless businesses, prepaid Other 10% 0% 17% 13% 11% 11%
handsets and airtime, and wireless accessories. Unallocated -11% -11% -10% -11% -9% -8%
• “The Shack” brand positioning holds promise, as Total EBIT margin 7% 3% 9% 8% 9% 8%
% of revenue by product category:
it deemphasizes the tired RadioShack brand. Wireless 34% 35% 33% 33% 38% 48%
• Guiding for 2011 EPS of $1.60-1.90. Management Accessories 20% 23% 24% 27% 24% 19%
expects sales to increase in the low- to mid-single- Personal electronics 15% 16% 15% 13% 11% 9%
digit percent range in 2011, driven by wireless. Modern home 13% 13% 13% 13% 14% 12%
Other 17% 14% 14% 14% 13% 12%
• Buybacks boosting value. RadioShack repurchased ∆ shares out (avg) -8% -8% 0% -5% -2% -3%
$400 million of stock at $20 per share in 2010. ∆ shares out (end) -15% 1% -3% -5% 0% -16%
1
Average store size: 2,482 sq. ft. for company-operated U.S. stores (4,486 at
INVESTMENT RISKS & CONCERNS yearend 2010) and 1,289 sq. ft. for company-operated Mexican stores.
2
Average store size: 49 sq. ft. as of yearend 2010.
• Management transition. Chairman and CEO Julian
Day, a highly regarded retail executive who was COMPARABLE PUBLIC COMPANY ANALYSIS
previously COO of Kmart and Sears, will retire in P/ This Next
May. James Gooch (43), who joined from Kmart as MV EV EV / Tang. FY FY
CFO in 2006, will become president. Board member ($mn) ($mn) Rev. Book P/E P/E
Daniel Feehan will become non-exec. chairman. BBY 12,430 13,330 .3x 3.9x 10x 9x
• Disappointing performance of T-Mobile postpaid GME 3,170 3,240 .3x 6.3x 8x 7x
business in Q4. RadioShack alleges that T-Mobile HGG 560 580 .3x 1.9x 13x 11x
has “materially breached” its deal with RadioShack. CONN 140 560 .7x .4x 22x 11x
RSH 1,490 1,560 .3x 1.9x 8x 8x
• Kiosk segment EBIT to decline $10-15 million in
2011, reflecting the impact of discontinuing Sam’s
Club kiosks, partially offset by ramping up Target MAJOR HOLDERS
Mobile kiosks. Kiosk EBIT should grow in 2012. CEO and chairman Day 3% | Other insiders 1% | FMR 13% |
• Capex to increase to $100-125 million in 2011, up BlackRock 7% | Ivory 5% | LSV 5% | Tiger Consumer 3%
from $80 million in 2010 and $81 million in 2009.
• Competition from other electronics retailers and RATINGS
discounters, including Walmart and Best Buy. The VALUE Intrinsic value materially higher than market value? 
company’s wireless phone kiosks compete against DOWNSIDE PROTECTION Low risk of permanent loss? 
providers such as AT&T and Sprint Nextel. MANAGEMENT Capable and properly incentivized? 
FINANCIAL STRENGTH Solid balance sheet? 
• Commoditization due to Internet-based price
discovery. While some consumers may value the MOAT Able to sustain high returns on invested capital? 
EARNINGS MOMENTUM Fundamentals improving? 
service of RadioShack, many turn to the Internet to
MACRO Poised to benefit from economic and secular trends? 
save money on big-ticket items. Some may come to
a store to get educated but ultimately buy online.
THE BOTTOM LINE
RadioShack’s performance has improved markedly over the past three years, with CEO Julian Day, formerly of Kmart,
deserving much credit. RadioShack posted a 4% comparable sales increase in 2010 and has been buying back stock below
our estimate of fair value, making this one of the more compelling small-cap ideas we have encountered recently. A caveat is
that consumer electronics retailing remains a business in which high returns on capital may not be sustainable.

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 Value-oriented Equity Investment Ideas for Sophisticated Investors

RADIOSHACK – OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE

Conservative Base Case Aggressive
Valuation methodology 6x EV to trailing
8x 2011E EPS 8% trailing FCF yield
adjusted EBITDA 1
2
Consensus estimate of 2011 EPS $1.72 per share
Assumed fair value multiple 8x
Resulting fair value of equity $13.76 per share
Shares outstanding at yearend 2010 106 million
Trailing net income $206 million $206 million
D&A $84 million $84 million
Capex -$80 million
Trailing free cash flow $210 million
Assumed FCF yield 10%
Interest expense, net of interest income $39 million
Income tax expense $130 million
Trailing adjusted EBITDA $460 million
Assumed fair value multiple of adjusted EBITDA 6x
Fair enterprise value $2.8 billion
Cash and equivalents $569 million
Current maturities of long-term debt -$308 million
Long-term debt -$332 million
$1.5 billion $2.1 billion $2.7 billion
Estimated fair value of the equity of RadioShack
$13.80 per share $19.90 per share $25.40 per share
Implied upside to recent stock price ($13.95 per share) -1% 43% 82%
Implied valuation metrics based on trailing financials:
EV to revenue ($4.5 billion) 0.3x 0.5x 0.6x
EV to gross profit ($2.0 billion) 0.8x 1.1x 1.4x
EV to adjusted EBITDA ($460 million) 3.3x 4.7x 6.0x
Trailing free cash flow yield ($210 million) 14% 10% 8%
Implied valuation metrics based on estimated forward financials:
Price to low end of management’s 2011 EPS guidance ($1.60) 9x 12x 16x
Price to high end of management’s 2011 EPS guidance ($1.90) 7x 10x 13x
Price to consensus EPS estimate for 2011 ($1.72) 8x 12x 15x
Price to consensus EPS estimate for 2012 ($1.86) 7x 11x 14x
Other implied valuation metrics:
Price to tangible book ($801 million) 1.8x 2.6x 3.4x
EV per full-time employee (35,100) $44,000 $62,000 $79,000
EV per retail location (incl. kiosks) (7,183) $213,000 $302,000 $384,000
EV per square foot (excl. dealer/other outlets) (11.5 million) $130 $190 $240
1
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, adjusted for other income or loss.
2
Consensus estimate of 2011 EPS of $1.72 is close to the midpoint of management guidance of $1.60-1.90.
Source: Company filings, The Manual of Ideas analysis, assumptions and estimates.

RADIOSHACK – RETAIL LOCATIONS AT YEAREND 2010

Average
Store Size At December 31,
(sq. ft.) 2010 2009 2008
U.S. RadioShack company-operated stores 2,482 4,486 4,476 4,453
Kiosks 1, 2, 3 49 1,267 562 688
Mexico RadioShack company-operated stores 1,289 211 204 200
Dealer and other outlets 4 n/a 1,219 1,321 1,411
Total number of retail locations 5 7,183 6,563 6,752
1
In April 2009 the company agreed with Sprint to cease an arrangement to jointly operate Sprint-branded kiosks in operation at that date. The agreement allowed
RadioShack to operate the kiosks under the Sprint name for a reasonable period of time, allowing it to transition the kiosks to a new format. In August 2009, the
company transitioned the kiosks to multiple wireless carrier RadioShack-branded locations.
2
In February 2009, the company signed a contract extension with Sam’s Club through March 31, 2011, with a transition period ending June 30, 2011, to continue
operating kiosks in certain Sam’s Club locations. As of December 31, 2010, the company operated 417 of these kiosks. This transition will begin on April 1, 2011,
and conclude on June 30, 2011, with the assignment to Sam’s Club of all kiosks operated by the company in Sam’s Club stores.
3
In 2009 the company conducted a test program of kiosk locations in approximately 100 Target stores. In Q3 2010 RadioShack signed a multi-year agreement
with Target to operate wireless kiosks in certain Target stores. In August 2010, the company began to open Target Mobile kiosks with the objective of operating
kiosks in the majority of Target stores nationwide by mid-2011. As of December 31, 2010, the company operated 850 Target Mobile kiosks, and it expects to
operate kiosks in approximately 1,450 Target stores by June 30, 2011.
4
Dealer and other outlets decreased by 102 and 90 locations, net, in 2010 and ‘09, respectively. The declines were driven by the closure of lower volume outlets.
5
In 2010, the company opened 871 retail locations and closed 251 retail locations. In 2009, the company opened 202 retail locations and closed 391 retail
locations. In 2008, the company opened 131 retail locations, acquired 200 Mexico company-operated stores, and closed 249 retail locations.
Source: Company data.

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 Value-oriented Equity Investment Ideas for Sophisticated Investors

RADIOSHACK – RETAIL LOCATIONS IN THE U.S. AND TERRITORIES

The real estate associated with almost all stores is leased rather than owned by RadioShack.
U.S. RadioShack Dealers and % of
Kiosks Total
Stores Other* Grand Total
Alabama 49 11 30 90 1%
Alaska -- -- 23 23 0%
Arizona 76 -- 24 100 1%
Arkansas 26 3 38 67 1%
California 552 236 39 827 12%
Colorado 63 15 31 109 2%
Connecticut 70 20 2 92 1%
Delaware 19 1 -- 20 0%
Florida 302 35 28 365 5%
Georgia 102 23 34 159 2%
Hawaii 24 -- -- 24 0%
Idaho 19 -- 15 34 0%
Illinois 173 79 32 284 4%
Indiana 98 36 40 174 3%
Iowa 34 21 47 102 1%
Kansas 37 15 26 78 1%
Kentucky 54 5 36 95 1%
Louisiana 67 20 17 104 2%
Maine 22 7 12 41 1%
Maryland 98 13 7 118 2%
Massachusetts 114 31 5 150 2%
Michigan 120 77 43 240 3%
Minnesota 61 80 35 176 3%
Mississippi 38 7 18 63 1%
Missouri 71 30 52 153 2%
Montana 7 -- 27 34 0%
Nebraska 20 11 20 51 1%
Nevada 38 -- 7 45 1%
New Hampshire 32 12 5 49 1%
New Jersey 160 41 6 207 3%
New Mexico 31 5 14 50 1%
New York 330 74 16 420 6%
North Carolina 125 22 38 185 3%
North Dakota 6 4 5 15 0%
Ohio 188 38 27 253 4%
Oklahoma 39 -- 29 68 1%
Oregon 52 -- 20 72 1%
Pennsylvania 211 53 24 288 4%
Rhode Island 21 4 -- 25 0%
South Carolina 54 8 18 80 1%
South Dakota 11 2 12 25 0%
Tennessee 67 15 29 111 2%
Texas 376 143 83 602 9%
Utah 28 8 19 55 1%
Vermont 9 -- 8 17 0%
Virginia 124 14 36 174 3%
Washington 91 6 30 127 2%
West Virginia 28 3 8 39 1%
Wisconsin 70 38 45 153 2%
Wyoming 6 1 16 23 0%

District of Columbia 13 -- -- 13 0%
Puerto Rico 56 -- -- 56 1%
U.S. Virgin Islands 4 -- -- 4 0%
4,486 1,267 1,176 6,929 100%

Source: Company data.

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 Value-oriented Equity Investment Ideas for Sophisticated Investors

This Month’s Top 10 Web Links

A Selection of Our Favorite Freely Accessible Internet Resources

Click on the link next to each title, or type the Web address into your Web browser:

 Prem Watsa’s Letter to Fairfax Shareholders http://bit.ly/icb7Sr

 Warren Buffett’s Media Conference in India http://bit.ly/e7CHJ7

 Ray Dalio Explains Macroeconomic Concepts http://bit.ly/i6FF8f

 Vito Maida of Patient Capital on Holding Cash http://bit.ly/ecDChG

 Eric Sprott on Why He Is Bullish on Silver http://bit.ly/gVOIaH

 Julian Robertson’s Latest Macro Comments http://bit.ly/if0bXi

 Ravi Nagarajan on Investing in Japan http://bit.ly/gyqBtj

 Howard Marks: “On Regulation” http://bit.ly/hIDwUk

 Notes from Warren Buffett Meeting on March 11th http://bit.ly/fX944M

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