So, what on earth is going on here?
Kodak is, for the time being, still the company you associate with the brand. In 2019, 67.31% of Kodak’s revenue came from “Print Systems”, while 16.83% came from the “Brand, Film and Imaging” segment.
It has a diverse geographic footprint, having earned roughly a third of its revenue from the US, a third from Europe, Middle East and Africa, a quarter in Asia Pacific and the rest from Latin American and Canada.
It made ZERO revenue from producing pharmaceuticals or drug ingredients.
Yet, it’s this spectacular pivot into drug making that has retail traders bidding up this share price.
The company has just secured a $765 million government loan to help the US fight the coronavirus. On the front page of the Kodak website is an announcement that, together with the US International Development Finance Corporation (DFC) it’ll be using this government loan to launch a new entity: Kodak Pharmaceuticals.
As a result, a swarm of Robinhood day traders started buying the company. If you’re not familiar with Robinhood it’s worth Googling. In a nutshell, it’s a very popular retail trading app which makes stock market investing feel a lot like online gambling. Its zero-brokerage model has attracted a huge swath of new and very inexperienced traders.
Yesterday, almost 79,000 Robinhood clients added Kodak to their share portfolios, ramping up the price to incredible levels.
Now two things struck me about this strange market phenomenon.
Firstly, Robinhood is starting to control the market. I love this for so many reasons, but mainly because it annoys all institutional and professional investors. They feel threatened as people start to take control of their own financial destiny. Personally, I think this is wonderful. People should take more interest in their own financial affairs.
I also don’t feel threatened because my stockbroking firm has always believed in empowering its clients. Our clients have industry leading technology at their fingertips. I would stack our retail trading technology against anyone in the world. I seriously doubt you will find a better offering.
But secondly, the rise of the online day trader does, to an extent, concern me. It’s not because I’m afraid that people won’t need our professional services. Far from it. When a huge amount of inexperienced money comes into the market, it creates real mispricing that professional traders can exploit. These wild and often irrational company moves are going to help professional investors make more money from the market than ever before.
Instead, my concerns stem from the hurt these newbie traders are going to feel when they lose their shirts.
If you don’t understand what’s driving prices, you may get lucky a few times, but it will be almost impossible for you to consistently make profits.
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It’s not an easy question to answer. Managing your own money, requires time and dedication. I absolutely believe you can do this yourself, but it does require commitment on your part.
I find the best place to start learning about financial markets is technical analysis.
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Remember: You need to crawl before you can walk. So, I’ll start with the basics. There is no point jumping into the deep end before you know how to swim.
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