The upswing I caught in shares of film giant Eastman Kodak during 2003 and 2004 pretty much defines the kind of contrarian calls I tend to look for. The stock had fallen from nearly $100 down to the low 20's. Sentiment was about as negative as it could get. Nobody was recommending investors buy and nearly everybody had a sell rating on it. The story was pretty bleak from a fundamental point of view. Consumers were all shifting from film-based cameras to digital and Kodak was far, far behind.

To diversify away from the traditional film business, EK started to beef up their digital camera product line and made some acquisitions in the medical imaging business, hoping for higher margins. In fact, they borrowed money to pay for the acquisitions. You can imagine how much Wall Street liked that. Investors hate it when companies take out debt for mergers or dividends, and usually they're right.

However, what the Street failed to realize was that medical imaging was indeed a faster growing and more profitable business than film. Kodak cut their once 7% dividend to help fund the turnaround plan. Did it work? Well, the stock went from the low 20's to the mid 30's. Few people noticed because nobody owned the stock, but I was happy to cash out with a more than 50% gain in less than a year.

All of the sudden a weak first quarter earnings report has sent EK shares back down to $25 each. There haven't been many downgrades though, as only 2 analysts have buy ratings on the stock, versus 6 with sells. Most people have dropped coeverage completely. The strategy must have failed, right?

Well, not exactly. Do you know who is the leading digital camera maker in the United States? That's right, it's Kodak. Just because they got a late start and didn't think the digital revolution would sweep the world as quickly as it did, they still are selling a lot of cameras. After all, Kodak is a pretty good brand, so consumers have warmed to their products very quickly.

The stock is down 30 percent. The P/E is 10. The dividend is 2 percent, and sustainable. The company's total debt load was cut from $3.2 billion to $2.3 billion during the 2004. Sounds like it's prime time to start focusing on Kodak stock once again.