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Kodak's (last) moment
As you jigger your portfolio for the next bull market, keep Kodak's latest plunge in mind.
June 19, 2003: 2:59 PM EDT
By Adam Lashinsky, CNN/Money Contributing Columnist

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PALO ALTO, Calif. (CNN/Money) - Trivia question with a lesson behind it: Which was the best-performing Dow stock of 2002?

Answer: Eastman Kodak.

That's right. The serial-warner racked up the best overall gain of the 30 Dow industrials last year, earning a total return (stock appreciation plus dividends) of 25 percent and painting egg on the faces of universally negative Wall Street analysts.

Kodak's top performance in 2002 predictably got investors excited about 2003. Barely two weeks into the new year Kodak's shares burst past $40, a level the venerable firm had last seen in late 2001.

Whatever exuberance was left in Kodak's (EK: Research, Estimates) shares ended Wednesday morning, when the company cut its forecasted second-quarter earnings, blaming the effects of SARS on Asian tourism. The stock dropped 10 percent on nine times normal volume, ending at $28.77, down about 17 percent for the year.

What did we learn, class?

The lesson here -- an old, and obvious, one that nevertheless gets ignored every time it's taught -- is that yesterday's winners usually aren't today's as well.

It's something all investors, especially the ones piling into red-hot tech stocks, should ponder these days. "Tech stocks are very dangerous to be holding right now," said James Gipson, a value investor who runs the Clipper fund. "The group which leads the next bull market is rarely the one that was the big winner of the last bull market."

My hunch is that investors read a statement like that, know in their hearts that it's right -- and then forget about it. The "momentum" game is for the nimble, but how nimbly did you play momentum stocks in 1999?

Perhaps that's your answer to whether you should be jumping on the tech bandwagon now.

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A tangential observation: I can think of one bubble-era stock that is approaching its all-time high: eBay. Compare eBay's feat with Yahoo, Amazon and AOL, still worth just a tiny fraction of what they were at their highs.

So is eBay (EBAY: Research, Estimates) overvalued as it gets near pre-bust levels? Who knows? But it's gotten back there because its business has been so good. You can't begin to say the same thing for the other companies.

As for Kodak, well, I'm guessing we won't be talking much about Kodak in the future. In November 1999, the editors of the Wall Street Journal booted Chevron, Goodyear, Union Carbide and Sears from the Dow, adding Microsoft, Intel, SBC and Home Depot.

Whenever they vote Dow components off the island next, it seems a sure bet Kodak will go.

That'd sure hurt Kodak's momentum once and for all.

In other news ...

Oracle's hostile bid for PeopleSoft is Topic No. 1 by far in Silicon Valley these days. Folks are nearly even split on the issue, between those who think Larry Ellison is just messing with PeopleSoft CEO Craig Conway and those think Larry's dead serious about wanting to buy PeopleSoft. (Hear my interview on the subject from Wednesday evening on Marketplace radio; Archived Webcasts are available for about 24 hours after the original broadcast.)

Interestingly, CNN/Money readers are just as evenly divided on whether or not the deal will happen. You can weigh in with your opinion here.

Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at

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