Eastman Kodak (NYSE: EK), which counts Sony (NYSE: SNE) and Canon (NYSE: CAJ) as related companies, continues its slide into fundamental hell. According to the third-quarter earnings release, sales declined a scary 26%, and a GAAP loss of 41 cents per share was reported. Last year at this time, Kodak produced positive income of 35 cents per share. According to Reuters, the adjusted loss of 23 cents per share was worse than analyst projections. Wall Street was hoping for something closer to a loss of 19 cents per share.

Don't you get the feeling management just doesn't know what to do? Kodak has become a conundrum of epic proportions. Just how is someone supposed to improve a situation that has gone so downhill?

Eastman Kodak (NYSE: EK - option chain) stock is trading lower today after the company announced yesterday evening that it will offer $300 million of convertible senior notes due 2017 in a private placement to qualified institutional buyers. Additionally, the private equity fund Kohlberg Kravis Roberts & Co. will buy up to $400 million in notes due in 2017 in exchange for two seats on EK's board of directors. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on EK.

This morning, EK opened at $6.34. So far today the stock has hit a high of $6.34 and a low of $5.81. As of 12:15, EK is trading at $6.16, down 52 cents (-7.8%). The chart for EK looks bearish and S&P gives EK a negative 2 STARS (out of 5) sell ranking.

Today was one of those directionless trading days after so many gains that there was absolutely no way to know if the markets would be up or down until the last few seconds of the day. We had a very strong durable goods reading for July and even home sales figures remained high.

Here were today's closing bell levels:

Dow 9,543.52 +4.23 (0.04%)
S&P 500 1,028.12 +0.12 (0.01%)
Nasdaq 2,024.43 +0.20 (0.01%)

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Most Unusual Volume

This was one of those days where profit takers had the markets soft all morning, but strong pending home sales rallied the stock market and trumped an inverted spending and income figure. A revision for a lower hurricane season helped insurers.

Here were today's unofficial closing bell levels:

Dow 9,315.51 +28.95 (0.31%)
S&P 500 1,004.86 +2.23 (0.22%)
Nasdaq 2,008.80 +0.19 (0.01%)

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Here are some highlights from last week's earnings coverage from BloggingStocks:

• Amgen Inc. (NASDAQ: AMGN) reported strong Q2 earnings thought revenue fell but beat analysts' estimates.
• Colgate-Palmolive Co. (NYSE: CL) beat Q2 earnings estimates but revenue suffered from currency effects.
• Dow Chemical Co. (NYSE: DOW) reported a drop in Q2 revenue and a net loss on restructuring charges.
• Eastman Kodak Co. (NYSE: EK) posted a deeper-than-expected Q2 net loss as sales plunged.
• Exxon Mobil Corp. (NYSE: XOM) reported its lowest quarterly profit in years, well short of expectations.

So, when you look at the second-quarter press release from Eastman Kodak (NYSE: EK), you notice something right off the bat. Part of the headline reads as follows: "Kodak Reports 2nd-Quarter 2009 Results, Reflecting Global Economic Realities." I don't think a shareholder can feel too encouraged after mentally processing the implied image that the results are like a mirror being held up to the ugly face of the recession, do you?

I didn't think so. Anyway, sales declined 29%, and I don't think we can use the currency issue to save the day on this particular top line. On an adjusted basis, the 43 cents from continuing operations that was lost during the quarter missed expectations by 7 cents, according to Reuters.

Investors continued to sell Eastman Kodak (NYSE: EK) during the second quarter, and shares bottomed at $2 per share.

Looking forward, I recently added Eastman Kodak to my Penny Stock Winners model portfolio as a buy recommendation.

In my opinion, the carnage at Eastman Kodak has been complete and the upside benefit of the digtal revolution is worth the speculation. The company may never fully recover from the last few years, but a small improvement in operations can result in big gains in the stock.

I would be a buyer of Eastman Kodak at these prices.

Next: Stock to Avoid #10

With such uncertainty, following an absolute return strategy continues to offer investors the biggest bang for their buck. There is no sense in guessing where the market will be down the road.

Instead, buy cheap stocks and sell stocks that are expensive. Then blend the two approaches together in one portfolio and chances are you'll make money.

Even with a huge rally in stocks, the S&P 500 ended the second quarter with a year-to-date gain of 1.78%. That is a vast improvement compared to the 11% loss at the end of the first quarter, but it's a minimal return for taking risk in the stock market.

Investors need to do better -- and they can.

Kodak's announcement today is evidence that sentimentality is dead in 21st century business.

The film world has, after all, been moping since Polaroid stopped producing its iconic instant camera film in early 2008 (take heart, Polaroid fans, "The Impossible Project" is working to reinvent instant film in an old Polaroid factory in the Netherlands). But today Eastman Kodak (NYSE: EK) said it was halting production of the complex-yet-storied Kodachrome film, immediately. Not only does the product make up less than 1% of its worldwide still-picture film sales; it's extraordinarily expensive to produce.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Baidu Inc. (NASDAQ: BIDU) reported better-than-expected Q1 earnings as revenues surged in the quarter.
• Burger King Holdings Inc. (NYSE: BKC) just beat Q3 expectations despite weak same-store sales growth.
• Corn Products International Inc. (NYSE: CPO) Q1 results were dragged down by higher corn costs.
• Dow Chemical Co. (NYSE: DOW) Q1 earnings sank on falling sales, job cuts and acquisition costs.
• Eastman Kodak Co. (NYSE: EK) reported a deeper-than-expected Q1 loss and suspended its dividend.
• Energizer Holdings Inc. (NYSE: ENR) posted better-than-expected Q2 earnings but revenue declined.

Eastman Kodak (NYSE: EK), whose colleagues include Canon (NYSE: CAJ) and Sony (NYSE: SNE), did not start its new fiscal year with a picturesque first quarter. No, it was more of an ugly, frayed-at-the-edges, nightmarish image of doom and gloom. And although the photography company does have a point when it states right at the beginning of the release that the global economic malaise is affecting its prospects, let's also be realistic. Kodak has been doing badly for a long, long time. This isn't just about the economy. This is about a company that still hasn't properly adjusted to a new, thriving business model.

According to this article, Kodak's adjusted loss of $0.95 per share from continuing operations missed Wall Street's call. By a lot. Some in the analyst community thought that Kodak would lose $0.44 per share. Others thought the company would lose less than even that figure. Doesn't matter what source you look at, the facts in the case make it clear that Kodak is not doing well. Worldwide sales shed just under 30% of their value. The digital segment fared very poorly in Q1.

An investment vehicle owned by Bill Gates reported a 5.2% stake in Eastman Kodak (NYSE: EK) this morning. The investment was disclosed in a form 13-G filed with the SEC, which indicates that the investment is passive in nature: Cascade Investment LLC does not have plans to become involved with the company's operations, or press for governance changes.

Bloomberg reports that the Kodak stake is Cascade's ninth-largest investment.

6 Stocks to Lead a Value Comeback
When cheap shares stop trailing, these names will do well. The include Kodak, Allstate, Meredith, JC Penney, MeadWestvaco and Whirlpool.
http://www.smartmoney.com/Investing/Stocks/6-Stocks-To-Lead-a-Value-Comeback/

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Amazon.com Inc. (NASDAQ: AMZN) shares surged after earnings easily topped Q4 expectations.
• AT&T Inc. (NYSE: T) reported that its Q4 earnings fell while its revenue rose marginally.
• Boeing Co. (NYSE: BA) posted a big loss and lower revenue due to strikes and design changes.
• Caterpillar Inc. (NYSE: CAT) reported that Q4 profit fell despite higher revenue and lowered its guidance.
• Danaher Corp. (NYSE: DHR) lower Q4 profit topped analysts' estimates, sending shares higher.
• Eastman Kodak Co. (NYSE: EK) reported a Q4 net loss and announced additional job cuts.

If you thought that four days of rallying was too much, it looks like the traders did too. Financials took a breather after critics started panning the BAD BANK theory. We also had much weaker durable goods and wider jobless claims to pour fuel on the fire. Here are today's closing unofficial bell levels:
DJIA: 8,147.73 (-2.72%)
S&P500: 845.10 (-3.32%)
NASDAQ: 1,507.84 (-3.24%)
Top Analyst Upgrades
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Altria Group Inc. (NYSE: MO) suspended its share buyback plan after its net earnings fell sharply. Maybe investors will have to decide if a dividend north of 7% is finally enough. This stock was just above the flat-line at $16.83 right before the close.