The
Daily Dow
Tuesday, November 11, 1997
by Robert Sheard
LEXINGTON, KY. (Nov. 11, 1997) -- Eastman Kodak <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EK)") else Response.Write("(NYSE: EK)") end if %> announced its latest restructuring plan today. Even before current CEO George Fisher's arrival at Kodak in 1993, the film giant had been struggling to ward off ever-increasing challenges to its market share from Fuji Photo Film of Japan.
And measures taken repeatedly since Fisher's hiring haven't affected the turn-around for Kodak, so new austerity measures were announced this morning. Over the next two years, Kodak plans to slash costs by an estimated $1 billion, including the elimination of some 10,000 positions (roughly 10.5% of its worldwide workforce).
One of the major concerns expressed by Fisher in his news conference this afternoon is the losses (or "investments" as they're called euphemistically) sustained in Kodak's efforts to enter the digital imaging field. This year's projected losses are $400 million in digital photography. Fisher stated that Kodak was going to return its focus to its power base -- the retail customer who sees Kodak as the quality leader in print photography services. While not abandoning the digital niche market entirely, Fisher made it clear that it would be treated as just that, a niche, not a front-line concern for Kodak. This particular aspect may have been the source of most analysts' displeasure with today's announcement.
Other announced measures include the increased use of outsourcing and more partnerships and joint ventures to share costs.
For Dow Dividend Approach investors, what does this mean? It's impossible to predict Kodak's future, of course, but this kind of situation is not unusual for the High Yield approach. It's precisely when such Dow giants get knocked around by Wall Street (and the stock, already down roughly 20% for 1997, lost another 6% after today's announcement) that we often find good long-term bargains.
By the time this much publicity has surrounded a stock like Kodak, it's not unlikely that the majority of bad news is already reflected in the current price. The Dow investor who buys one of these High-Yield Dogs when it's down often smiles in a year or two after the company cleans up its performance and Wall Street gets interested in it again.
I'm not predicting that Kodak is the next great price performer for the Dow Approach; I have no way of knowing whether that is to be the case. But I wouldn't hesitate to include a stock like Kodak in a Dow Dividend Approach portfolio because of today's news. That's precisely the way this strategy is intended to work. Buy the stocks no one else wants at bargain prices and then patiently wait until everyone wants them again. Then you sell and start over. It's one cliche Conventional Wisdom got right, but so often doesn't accomplish: Buy Low and Sell High.
In other Dow Dogs news, Caterpillar <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAT)") else Response.Write("(NYSE: CAT)") end if %> was tripped on an downgrade by Oppenheimer from "hold" to "under perform." If you hold Caterpillar as part of a Dow portfolio, though, this isn't a signal you should pay attention to and sell out, but it does explain why the stock was whacked today. Fool on!
TODAY'S
NUMBERS
Stock Change Last -------------------- T - 1/16 48.31 GM -1 9/16 63.88 CHV + 15/16 84.75 MMM +2 1/2 96.50 |
Day Month Year
FOOL-4 +0.22% 1.02% 20.76%
DJIA +0.08% 1.57% 17.22%
S&P 500 +0.29% 1.00% 24.71%
NASDAQ -0.37% -0.55% 22.76%
Rec'd # Security In At Now Change
1/2/97 153 Chevron 65.00 84.75 30.38%
1/2/97 120 3M 83.00 96.50 16.27%
1/2/97 479 AT&T 41.75 48.31 15.72%
1/2/97 179 Gen. Motor 55.75 63.88 14.57%
Rec'd # Security In At Value Change
1/2/97 479 AT&T 19998.25 23141.69 $3143.44
1/2/97 153 Chevron 9945.00 12966.75 $3021.75
1/2/97 120 3M 9960.00 11580.00 $1620.00
1/2/97 179 Gen. Motor 9979.25 11433.63 $1454.38
CASH $1257.01
TOTAL $60379.07
|