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Kodak shares rocketed 2,760% this week... What on earth is happening!?

by , 31 July 2020
Kodak shares rocketed 2,760% this week... What on earth is happening!?
Just when you thought 2020 couldn't get any stranger…

Out of left field, Kodak shares exploded onto the scene with a 2,760% weekly gain.

Let's put that in context. If you'd bought R10,000 worth of Kodak this Monday, your account balance would now be R276,000 at time of writing this article!

That's without any fancy gearing or exotic structures. This is simply by buying ordinary Kodak shares on the New York Stock Exchange.

Now, if you're like me, you probably thought Kodak was a defunct camera company. And if you'd told me Kodak had filed for bankruptcy three years ago, I would have believed you.

 
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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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In this letter you'll discover how you can use a little-known investment strategy to make fast and effortless gains of R1,141 – R5,190 every few weeks.
 
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So, what can I do about it?
  
Since we offer clients a retail trading platform which allows you to trade yourself at extremely low cost, we get a lot of requests about the best way to start out in the market.
 
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.
 
It’s certainly not the only skill you need, not by a long shot, but the ability to look at, read and analyse charts is central to short-term trading. It lays a solid foundation on which you can build.
 
Finding patterns, understanding indicators, identifying areas of support and resistance.
 
These are all things you MUST be able to do if you want to trade yourself.
 
So, in the next few weeks I’ll be writing a series of trading articles, taking you through some of the more important facets of technical analysis. As a Money Morning reader, it should set you on the right path to becoming a more confident trader.
 
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.
 
I’ll be starting next week by demystifying some of the common investor and trader jargon. Once we’ve covered some of the basic terms, we move to risk management and finally we’ll get to the fun stuff: How to create and identify your own actionable trade ideas.
 
By the time we’re finished with this mini-series hopefully you’ll be well on your way to identifying the next Kodak share price move!
 
If you’d like to get started, follow us on this technical journey, it’s worth signing up for a free demo account. This will allow you to follow and test the principles we discuss with no risk to your actual account balance!
 
 
The demo account is perfect if you want to learn to use the tools available to you, but also understand there is a limit to the number of “paper” instruments available. A live account gives you full access to our product suit.
 
The minimum deposit is only R5,000 and will give you full access to all JSE shares, as well as international markets like the New York Stock Exchange, NASDAQ, London Stock Exchange, Deutsche Boerse.
I look forward to you joining me on this journey!
 
Christo Krog,
Rand Swiss, Wealth Manager


Kodak shares rocketed 2,760% this week... What on earth is happening!?
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