Posted on Friday, March 6, 2009 - by Henry Walter
Why is Bill Gates Accumulating Eastman Kodak Stock?
Posted February 23, 2009 – by Henry Walter

We don’t know. You would have to ask Bill himself or Michael Larson, the Business Manager of Cascade. But there is plenty of speculation.

There are actually two investment vehicles involved.

According to Bloomberg (02-21-09), Cascade Investment LLC, owned by Gates, bought 7.95 million shares of Kodak recently. Separately, the Bill & Melinda Gates Foundation boosted its shareholdings of EK to 5.55 million. So combined, Gates owns 13.5 million shares making him the fourth-largest shareholder in Kodak.

According to Morningstar (02-22-09), the largest holders are

Legg Mason Capital Management* …………..47.3 million shares
Brandes Investment Partners, LP ……………..24.38 million shares
Franklin Mutual Advisers ……………………. 17.08 million shares

*Bill Miller of Legg Mason, has been a perennial bull on EK, and Legg Mason Value Trust, which he manages, set a record of beating the S&P 500 15 years in a row from 1991 to 2005. Since then, his performance has been less than stellar.

Going back to the “Why?”, the message boards on the Web are having fun with this. It could be nothing more than the stock hit an all-time low and Gates’ investment people see value. If you ran a screen of undervalued stocks, with financial parameters indicating the chance of survival are good, EK would probably be on the list. And there is always the possibility EK will be bought out at a premium.

In the scheme of things, this is not a big deal for the Gates investment organization. At $4 a share, the total value of the holdings in EK is $54 million. The Gates Foundation has assets of $9 billion and Cascade $4 billion. Hopefully, for those long EK, Gates could add to his holdings.

We did hear that several employees and retirees thought EK was a good speculation below $4 and had either bought or were thinking of buying very small positions. Kodak’s all-time high was near $95 in early 1997, and its all-time low, thus far, $3.37 last week. Analysts tracked by MarketWatch have the following recommendations: Buy 0, Overweight 0, Hold 1, Underweight 1, and Sell 4. We’d take Gates over the analysts.

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