This is an excerpt from an article I originally published on Seeking Alpha on January 11, 2012. Click here to read the entire piece.)
On October 4th, I lamented that I missed out on trading a nice bounce in Eastman Kodak (EK) after the company refuted rumors it would file for bankruptcy. When EK fell as low as $0.37/share last week, I readied myself to take another stab at the “bankruptcy trade.”
However, on Tuesday, EK opened up over 25% on news that the company is attempting a restructuring plan in another effort stave off bankruptcy. I wanted to get ahead of this kind of news, but I swallowed my disappointment, waited for a small pullback in the shares, and bought. I posted the trade on my twitter feed with the following explanation:
“Buying into $EK restructuring plans for now. Kind of stock that will soar if market giddiness continues despite overbought conditions, etc..”
Before I could even write this article to explain my rationale in more detail, my position gained 71%. Under the current conditions, it made no sense to just sit on that kind of profit, so I sold it today (Jan 11, 2012). I am providing my rationale anyway because it forms the basis for why I remain interested in buying into any future dips in the stock.
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So what is Eastman Kodak’s hope? That is, besides winning a major payday through patent litigation against the likes of Apple (AAPL) and HTC? According to the Associated Press:
“Kodak is hoping that printers, software and packaging will produce more than twice as much revenue by 2013 and account by then for 25 percent of the company’s total revenue, or nearly $2 billion.”
The company “just” needs to survive long enough to get there.
{snip} I now prefer to wait for the stock to stabilize and form some kind of base before contemplating a re-entry.
Be careful out there!
This is an excerpt from an article I originally published on Seeking Alpha on January 11, 2012. Click here to read the entire piece.)
Full disclosure: no positions