Mason Hawkins' (Trades, Portfolio) Southeastern Asset Management added to its position in Eastman Kodak Co. (KODK, Financial) by 2,704.52% on Nov. 30.
Hawkins is the CEO and chairman of Southeastern, which he founded in 1975. His firm manages the Longleaf Partners Fund. The firm relies on in-depth, fundamental research to find strong businesses that are discounted and have good management.
As mentioned in a previous article, Hawkins' firm established the position with Kodak during the third quarter. In the most recent transaction, the firm purchased 11,494,200 shares for an average price of $15.15 per share. It now holds a total of 11,919,200 shares. The trade had an impact of 1.64% on the portfolio.
In addition, Kodak recently sold $200 million worth of preferred stock to the investment firm. The company said the proceeds will be used to prepay its outstanding second lien term loans. In return, Southeastern will be allowed to nominate members to the board of directors, a great bonus for Hawkins.
Eastman Kodak is a technology company that is known for its focus on imaging. The Rochester, New York-based company has a market cap of $696.8 million and an enterprise value of $906.8 million. It has a price-earnings (P/E) ratio of 24.6 and a price-sales (P/S) ratio of 0.42.
GuruFocus ranked the company’s financial strength 4 of 10. The Piotroski F-Score of 6 and Altman Z-Score of 1.5 suggest that while the company is stable, it is under financial stress. The return on invested capital (ROIC) outperforms the weighted average cost of capital (WACC), meaning the company is creating value as it grows. The company’s cash-debt ratio and interest coverage ratio are both below the industry median and underperform 62% and 93% of its competitors.
As for profitability and growth, GuruFocus gave the well-known photography company a ranking of 4 of 10. It has an operating margin of 7.2% and a net margin of 1.7%. The return on equity (ROE) and return on capital (ROC) outperform 100% and 63% of other companies in the global consumer electronics industry. However, the return on assets (ROA) underperforms 59% of competitors.
In its third-quarter earnings report, Eastman Kodak posted net earnings of $12 million, compared to net loss of $21 million for the same quarter the year before. However, revenue declined 11% to $380 million. Eastman Kodak CEO Jeff Clarke said the company posted its second consecutive profitable quarter and expects to meet the full-year guidance of $1.5 billion to $1.7 billion in revenues and operational EBITDA guidance of $135 million to $150 million.
Hawkins' firm is the company’s largest shareholder among the gurus with 28.14% of outstanding shares. This represents 1.7% of its total assets managed. Jim Simons (Trades, Portfolio), George Soros (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) also hold positions in Eastman Kodak.
The DCF Calculator gives the stock a fair value of $6.31; it was trading at $16.5 on Wednesday.
Technology stocks have a weight of 12.1% on Southeastern's portfolio. To see all of Southeastern's current holdings, visit the portfolio.
Disclosure: I do not own stock in any companies mentioned in the article.
Start a free 7-day trial of Premium Membership to GuruFocus.
