Tuesday, June 05, 2007

Some Thoughts and Speculation

I've been a champion of Eastman Kodak (EK) for quite some time now. Thus far, it has been a poor investment. While I'm not losing money on it, I've lost quite a bit in terms of missed opportunity, as it has severely underperformed the market and has returned far less than the risk-free rate.

I've bought shares a total of 4 times in unequal portions:

08/17/2004 $28.72
10/20/2004 $29.93
04/25/2005 $26.94
09/21/2006 $21.59

Cost Basis: $26.62

Since I've owned it, I've received 3.7% additional shares as a result of dividend re-investment. So, the effective cost basis taking this into account is $25.68.

I've certainly endured some ups and downs, and I was close to throwing in the towel on a number of occasions as some of the longer-time readers might recall. But, for better or worse (mostly worse), I've held on to the shares.

That's just to give some background, since I'm on lunch break and have some time to write up a bit about it.

So, in the past few trading days, I would say that something seems a bit odd in the trading of both EK stock and its options. Shares have been moving up strongly with large volume seemingly ignoring other market activity. No real news of any kind came out that should prompt this activity.

Looking at today's options trades... 1,567 June 27.50 contracts traded with an open interest of 6,551. The July and October contracts also experienced heavy call volume.

And, to add further to the speculative machine, one of their board members, Richard Braddock, practically doubled his position about a month ago with a couple of purchases on the open market at around $24.80. Maybe there's not much to it other than him seeing the shares as an opportunity to make some extra money... as they say, "there are a hundred reasons to sell a stock, but there's only one reason to buy."

Who knows what the truth is, really. But, something seems a bit off. Please don't think of me as some broken record that keeps bringing up buyout talk of positions I hold, but I do wonder about this sort of stuff often when I monitor trading activity.

Although the Legg Mason Value Trust did do some selling of shares, 20% of EK is still owned by Legg Mason. They clearly have not given up on the company.

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