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Mason Hawkins' Firm Bets Big on Eastman Kodak Co

GuruFocus.com

- By Graham Griffin

Mason Hawkins (Trades, Portfolio)' Southeastern Asset Management has revealed a significant boost in their holding of Eastman Kodak Co. (NYSE:KODK).


The firm, led by Hawkins since 1975, takes a value-focused approach to investing. It seeks to achieve superior long-term performance by acquiring equity securities in understandable businesses with strong balance sheets, run by capable management and trading at less than intrinsic value.

According to Real-Time Picks, a Premium GuruFocus feature, the firm acquired an additional 18.85 million shares in two separate purchases on Sept. 10. The shares were purchased for an average price of $5.82 per share. Overall, the purchases represented a 3.96% impact on the portfolio.

Mason Hawkins' Firm Bets Big on Eastman Kodak Co
Mason Hawkins' Firm Bets Big on Eastman Kodak Co

Hawkins' firm has held shares of the company since the third quarter of 2016. In 2017, the firm boosted its stake in the company by 651.52% with the purchase of 4.30 million shares. The holding remained at that level throughout the last three years. The recent two purchases increased the holding by well over 300% and brought the new total of shares held to 23.84 million.

GuruFocus estimates that the firm has lost 8.38% on the holding during the duration of ownership.

Eastman Kodak operates via several business segments: print systems, enterprise Inkjet systems, Kodak software, brand, film and imaging, advanced materials and 3D printing technology. The print systems segment, which contributes over half of total revenue, offers digital and traditional products and services to various businesses, such as commercial print and book publishing.

The company announced plans earlier this year to transition its U.S. plants to the production of pharmaceuticals. Alongside the planned transition came a federal loan upwards of $765 million to aid in the transition and production. The company saw a massive valuation increase with the announcement before negative allegations arose around insider trading in the days prior to securing the loan.

As of Sept. 11, shares were trading at $6.29 with a market cap of $473.79 million. According to the Peter Lynch Chart, the company was trading below its intrinsic value from the second half of 2017 through 2018.

Mason Hawkins' Firm Bets Big on Eastman Kodak Co
Mason Hawkins' Firm Bets Big on Eastman Kodak Co

GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rank of 3 out of 10. The GuruFocus Value chart shows that the company is significantly overvalued and there are four severe warning signs issued for low Piotroski F-Score, declining gross margin percentage, declining revenue per share and an Altman Z-Score placing the company in distress. The company has seen negative cash flows over the majority of the last decade.

Mason Hawkins' Firm Bets Big on Eastman Kodak Co
Mason Hawkins' Firm Bets Big on Eastman Kodak Co

Hawkins' firm is currently the top shareholder with a whopping 31.47% of shares outstanding. Other top shareholders include Vanguard Group Inc. (Trades, Portfolio)(1.87%), BlackRock Inc. (Trades, Portfolio)(1.55%), Geode Capital Management, LLC. (Trades, Portfolio)(0.44%) and Northern Trust Corp. (Trades, Portfolio)(0.30%).

Portfolio overview

Overall, Hawkins' firm is invested in 29 stocks with one new holding as of the end of the second quarter. By sector weight, it is most invested in communication services (29.77%), industrials (19.05%) and energy (12.55%).

Mason Hawkins' Firm Bets Big on Eastman Kodak Co
Mason Hawkins' Firm Bets Big on Eastman Kodak Co

Disclaimer: Author owns no stocks mentioned.

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This article first appeared on GuruFocus.