Eastman Kodak: Out With The Old

For the last year I have been on a campaign to rid my portfolio of clutter: odd lots of stock that have accumulated over the years, mostly due to spinoffs, which contribute little to overall results.

Yesterday I sold 33 shares of Eastman Kodak (EK) at 25.60. EK has been rallying since it reached a split-adjusted 50 year low at 18.73 last August. But Kodak and the broader market appear to be running out of steam, and I think this is a good time to sell. The stock has a mediocre yield of 1.95% but above average volatility, beta 1.33. It wouldn’t surprise me to see EK decline to 15 before the year is over.

My wife’s family has a long history with Kodak. Her grandparents bought a few shares in the 1940s. The stock went up like a rocket in the 1950s and 1960s, and split over and over. When the grandparents passed away, my wife and her brothers inherited several hundred shares each. Most of my wife’s shares were sold by her parents to pay my wife’s expensive prep school and college tuition. But when we got married, she still had 100 shares, and we sold 67 of these to buy our first house for $11,000.

In 1971, Eastman Kodak stock was very high and real estate was dirt cheap. We should have sold all the shares and bought more real estate! That drafty old farmhouse has to be worth at least $200,000 today, but 67 shares of EK are worth only $1715 - probably not even enough to pay the real estate tax on that farmhouse!

We have held onto to the remaining 33 shares of EK all these years for sentimental reasons, while knowing that they were steadily declining in value. Not very bright! It has been obvious for more than a decade that digital photography was eventually going to kill Kodak’s film business. The company is finally catching on and making some competitive digital products, but I think it is too little, too late.

EK 1-yr. chart

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