<FOOLISH FOUR PORTFOLIO>
Getting to know JPM
Reston, VA (Dec. 29, 1998) -- Modest rises in all of our stocks today put another fifty-two bucks into our pocket -- dinner and a movie in 2015. That's the year two thousand fifteen -- or will we say twenty-fifteen? Looks weird, doesn't it? Guess we'd better get used to it.
Major banker J.P. Morgan (NYSE: JPM) was the big winner today, earning enough to cover what it cost us to buy it and putting all of our stocks into the black.
Little ol' International Paper (NYSE: IP) also had a respectable finish today. Maybe this will be IP's year. It's sure due for a rally. This is its third year in the Foolish Four, and the first two certainly weren't anything to crow about.
Here's how our portfolio looked today -- a good day for the market in general, by the way, so our moves up are borne on a rising tide. Our slightly-over-one-percent rise closely matched the Dow's -- but bring out the paper streamers and noisemakers early, 'cause we actually beat the Standard & Poor's 500 Index today. (scroll down for table)
Pur. %Gain/ Symbol Shares Close Change Price Loss Value CAT 24 45.63 +11/16 43.08 +5.90 1,095.00 IP 22 44.56 +7/8 43.55 +2.32 980.37 JPM 9 105.75 +15/16 105.54 +0.19 951.75 MMM 14 75.13 +3/4 73.57 +2.11 1,051.75 Cash 28.26 TOTAL $4,107.13 Initial Position Total invested: $3,971.74 (includes commissions paid) Cash in account: $28.26 Account total: $4,000.00
Sharp-eyed readers may notice that I've changed the initial prices for each stock from yesterday. The prices didn't really change, of course, I just prorated the cost of the commission into each stock's initial price. That's the way that the IRS accounts for commissions, and it makes sense. The price of the stock is what it cost you to acquire it -- if that acquisition includes the cost of a commission, then your share price is actually higher than the quoted sales price of each share. The numbers above reflect that, and this is how all of the real money portfolios report their purchase prices.
Today we continue getting to know our Foolish Four stocks with a look at a company that symbolizes old-time, big-name banking.
J.P. Morgan is a commercial bank with a formidable history, but it has recently refocused on investment banking, just in time for a global financial crisis. Thanks to turmoil in Russia, Asia, and Brazil, its revenue from trading declined by $758 million from the second to the third quarter this year. Overall fourth quarter results are projected to be even lower than the third quarter, which itself saw a 32% decline in revenues and a larger drop in earnings.
The future is not easy to read for J.P. Morgan. It has been reducing its exposure to emerging markets in Latin America and Asia, cutting credit exposure to Asia by 50% since the end of last year. They've announced layoffs equal to 5% of their workforce and are winning some high-profile clients. Their mergers and acquisition division recently advised Exxon on its merger with Mobil. The company also announced an increase in its dividend and a share repurchase program as a sign of "confidence in the outlook for Morgan's global business." Morgan's dividend was already the highest in the Dow; at $0.99 per quarter, its yield is almost 4%, which provides some security.
With the increased dividend and share repurchase program, the board of directors is using classic techniques much respected by Wall Street to say in no uncertain terms that the company is undervalued and that company directors have high confidence in the future of the company. Let's hope they are right.
Fool on and prosper!
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Stock Change Last -------------------- UK - 3/4 43.56 IP + 7/8 44.56 MO + 3/16 54.19 EK --- 72.25
Day Month Year FOOL-4 +0.15% -1.02% 12.97% DJIA +1.02% 2.24% 17.86% S&P 500 +1.33% 6.72% 27.96% NASDAQ +0.07% 11.91% 38.93% Rec'd # Security In At Now Change 12/31/97 276 Philip Mor 45.25 54.19 19.75% 12/31/97 206 Eastman Ko 60.56 72.25 19.30% 12/31/97 289 Int'l Pape 43.13 44.56 3.33% 12/31/97 291 Union Carb 42.94 43.56 1.46% Rec'd # Security In At Value Change 12/31/97 276 Philip Mor 12489.00 14955.75 $2466.75 12/31/97 206 Eastman Ko 12475.88 14883.50 $2407.63 12/31/97 289 Int'l Pape 12463.13 12878.56 $415.44 12/31/97 291 Union Carb 12494.81 12676.69 $181.88 Dividends Paid YTD $1092.81 TOTAL $56487.31
</FOOLISH FOUR PORTFOLIO>