ETFs are securities certificates that state legal right of ownership over part of a basket of individual stock certificates. Several different kinds of financial firms are needed for ETFs to come into being, trade at prices that closely match their underlying assets, and unwind when investors no longer want them. Laying all the groundwork is the fund manager. This is the main backer behind any ETF, and they must submit a detailed plan for how the ETF will operate to be given permission by the SEC to proceed.

In theory all that a fund manager needs to do is establish clear procedures and describe precisely the composition of the ETF (which changes infrequently) to the other firms involved in ETF creation and redemption. In practice, however, only the very biggest institutional money management firms with experience in indexing tend …

I have begun a new series of posts at RealMoney focusing on Wallflowers - stocks that have limited analyst coverage. By identifying stocks that fall below Wall Street’s radar screen the hope is to find some undervalued gems.

It may seem odd, on the heels of its deal to acquire Wendy’s (WEN) , to classify Triarc (TRY) as a wallflower. Certainly it has not shied away from publicity of late. However, in market terms, a wallflower is an under-covered stock, and with just one analyst currently covering the name, Triarc certainly qualifies.

I think the acquisition will do several things for Triarc:

Raise its profile
Bring some of the 8 analysts covering Wendy’s on board
Reduce the overhang of Nelson Peltz’s virtual controlling interest
Simplify the ownership structure
Improve the capital structure

As to valuation, with the restructuring and other deal-related anomalies, estimating earnings is likely to be something of a …

RadioShack’s (RSH) first-quarter net income fell 8.7%, hurt by increased promotions and lower sales of Sprint Nextel (S - Annual Report) wireless services. Shares are down more than 13% today on the news, wiping out the gains driven by last week’s rumor of an acquisition by Dell (DELL).

Part of my thesis for RadioShack is that declines are already priced in. I’ve said I’d accept a return in line with that of RadioShack debt – which reflects the company’s relative risk and allows for a modest premium based on the more favorable tax treatment of equity returns. At the time, RadioShack’s May 2011 note was yielding about 7%. To generate equity returns higher than this, RadioShack will have to limit its free cash flow declines

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Somehow I missed this early in the week. Hat tip to Todd Sullivan’s - ValuePlays:

Apparently on Monday there was heavy call buying in RadioShack (RSH) - ironically a day I was writing puts on the name. Rumor is that Dell (DELL) is kicking the tires. It would be an easy way to get into retail in a bigger way.

Here’s a video discussing the rumor.

Anyhoo - my original thesis was that RadioShack’s valuation is cheap, at ten or eleven times earnings. My preferred measure, the free cash flow yield, is a downright juicy 14.3%. With that kind of …