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Eastman Kodak (EK) is a great brand. It is to pictures what Xerox (XRX) is to copying.

A few years back, the company seemed to have lost its way with its lack of investment in digital cameras and heavier focus on disposable cameras and film. Since then the company has shifted its strategy towards digital photo products and commercial printing. Even now, 6 of the 10 analysts that follow this stock rate it a sell, while the remaining 4 are neutral on the stock. Over 14% of the float is currently being shorted and the company has loads of debt.

However, Kodak does generate over $1 billion in free cash flow annually and has some high profile following and ownership in Bill Miller of Legg Mason, Brandes Investment, Templeton Global Advisors and Private Capital Management. All these entities have a combined stake of 54% in EK, which is probably why the stock is up 50% in a year. Its top billing is its potential for high free cash flow once it is done restructuring by 2008.

On June 14th, EK broke out of its 7-month base on more than 4 times its average volume on the news of a new technology that would enable capturing sharp pictures in bad (dim) light. Following the breakout, Kodak finalized the sale of its Light Management Films business - part of its restructuring towards digital photography.

Kodak is not the most exciting company but I believe patient investors will be rewarded handsomely. I recommend buying at current levels.

Full Disclosure: I do not own EK but my position can change anytime without notice.

EK 1-yr chart:

EK 1-yr chart

Source: Kodak Moment: Free Cash Flow Potential Makes EK A Buy At Current Levels