Profit Pregame

Cleared Allegations and Robinhood Chasers – Here’s My Plan for Investing in Kodak

The Kodak investigation is over…

After months of waiting, here’s the results of the investigation into Kodak.

What’s happening?

It was only a few months ago that we saw Kodak’s stock hitting new highs. The reason why? Back in July, the company received a $765 million loan via the Defense Production Act. The loan was given to Kodak to help push the manufacturing of generic drugs. However, in August, the government decided to halt the loan when whispers of insider trading hit the scene. And there was good reason for this speculation too… The day before the loan announcement, which sent the stock to $30 a share from $2.00, there was heavy trading volume. And executives earned a massive payday as the stock ended, raising over 1000%.

After a thorough investigation, the committee announced that while Kodak did what they considered a sub-par job in corporate governance matters, there were no real violations of the law. But the investigations weren’t done. And US government regulators reportedly investigated why Kodak announced the loan on July 27, the day before the official announcement.

And here’s a close look at what they found…

Where’s the money?

After months of deliberation and digging, the US International Development Finance Corp, which brokered the deal, found no evidence that “employees of the agency had any conflicts of interest in the plans.” The inspector general’s report also found no wrongdoing in the government’s process of administering the loan.

But despite the stock running up nearly 60% on the good news, as investors, we have to ask ourselves the tough questions. You see, following the news of probes into the deal by federal agencies, including the Securities and Exchange Commission, the stock sunk like a rock. And while the cleared allegations are good news for the company, there’s no date for when this halted loan will be released. In fact, as of right now, it’s unclear whether the agency will even move forward with the loan.

And here’s how that impacts my next investing decision…

How do I get some?

Let me start by saying I wasn’t surprised when I saw Kodak soar on this recent news. It’s an excellent development for the company but the stock, as it has been for some time, is still a no-buy for me. And there’s a handful of reasons why.

Firstly, as mentioned above, there’s no real promise or timeline for this loan to be given to the company. So, many of these investors might find themselves sitting and waiting for a boost that may never come. On top of this, Kodak still has no real business model or plan I have seen of what they plant o do in the future. And as my dad always used to say, failing to plan is failing to plan. Lastly, Kodak is a favorite name for Robinhood chasers. Robinhood chasers are investors that chase headlines and retail stocks, pumping up stock with no real positive outlook. And that’s why I believe it’s so important, especially in volatile times like we’re seeing, to stick to your trading plan and block out the noise of what others are doing.

With that said, if you’re interested in throwing your hat in the Kodak ring, I would look to sell this stock before I considered buying it. I believe we’ll see the stock sell-off the rally it experienced, and selling it could deliver some fast and easy profits.

In the Spotlight: David’s Bridal is rebuilding despite the pandemic…

Just as covid causes businesses to close their doors, it also forced events and celebrations to be put on hold as well – including weddings. But despite the setback, David’s Bridal CEO said that demand for wedding dresses has proved to be consistent and resilient. And many brides are still getting married, just with a smaller crowd.

This is an exciting development given the struggles brick and mortar retail has faced, and it’s just another name on the long list of retailers trying to recoup lost sales over 2020. But more importantly, David’s bridal has another interesting angle. Last year, the chain store emerged from bankruptcy after reducing its debt load by more than $400 million. So, this store has been on the “comeback path” for a while now. And they did it by adjusting their inventory to adapt to brides’ evolving tastes and focused on their digital presence, such as social media. These changes, in turn, helped them navigate and survive the pandemic.

Sound familiar?

It should. I’ve said it once, and I’ll say it again: companies focusing on their digital presentation and the online experience are the ones that will come out on top of this pandemic. And David’s bridal is just another example of that. With that said, retail hasn’t been a sector that I’ve been pouring money into – but I’ll be keeping a close eye on this stock, and I’ll be sure to keep you updated.

It’s Hard to Predict the Future…

If you’d told me last year – even earlier this year – that David’s Bridal would be on my watch list, I probably would’ve laughed in your face.

But as always, the markets change and businesses adjust.

While it can be very difficult to accurately forecast the future, one of my colleagues has made his living doing just that…

Investing expert Shah Gilani uses the insight that comes with over three decades of experience while telling his readers which stocks to buy, and which to drop like a bad habit.

And today, he’s revealing his outlook for over 50 stocks in his presentation titled “Buy This, Not That.” Click right here to view it.

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