Momma don’t take my Kodachrome away

When I think back on all the cr*p I learned in high school, It’s a wonder I can think at all
And though my lack of education hasn’t hurt me none
I can read the writing on the wall
(Paul Simon – Kodachrome)

At the start of 2017 Eastman Kodak Company shares (KODK.NY) traded at just over US$15; a year later, on the morning of 9th January 2018, they were languishing at just over US$3.

The company announced plans to issue its own cryptocurrency with the aim of allowing photographers to licence their work using “KodakCoin”, as well as scanning the web to track down copyright violations. Of course, some have seen this as an attempt to hop on a bandwagon; surely not…

By the close of business on 9th, the shares had more than doubled in value to US$6.61; in pre-trading on the tenth they were up further to over US$10, opened at US$12 and went to an intra-day high of US$13.12. For the year to date, fledgling though it is, the stock is up 182%. Everyone’s a winner, right?

Not quite; someone (and likely more than one) bought at US$13.12 and their holding, two days later, is down 32%. That investor needs to see a 50% rise from here to get back to parity


Of course, it is entirely possible that our mystery investor will get her or his money back; after all, a 50% rise is not impossible, because we can see it on the graph above. Now I’m not commenting on Kodak as a company, I’ve not analysed their balance sheet, but I will offer the following comments:

  • Kodak has not paid a dividend since 2009, and filed for bankruptcy in 2012; since 2009 anyone holding Kodak stock is effectively making an interest free loan to them.
  • It has yet to recover from the decline of print photo industry in the 1990s, and does not seem to have a strategy to deal with the fact that most people now carry a high spec camera in their pocket
  • The leap in share price on Tuesday was purely on an announcement, with little substance to back it up; this has all the hallmarks of 1998 when tech stocks were ramped up purely because of investors FOMO (fear of missing out)

Our investment style is always likely to miss “January 9th”, but it is more important that we miss January 10th to 12th; blindly leaping into an investment, without proper analysis and research can leave investors with a 32% fall in capital and a nasty taste in the mouth. Everything looks worse in black and white…?

Jim Harrison
Investment Analyst

doug brodie