<THE DRIP PORTFOLIO>
Plus, dump Campbell or simmer it?
by Jeff Fischer (TMFJeff)
ALEXANDRIA, VA (April 9, 1999) -- I received an email from TMF Selena (who, incidentally, is 10 feet away from me in the office) that shared the most popular stocks held by investment clubs in 1999 according to the National Association of Investors Corp. (NAIC). Which stock, do you think, was the most widely held by thousands of clubs across America:
If you said Coca-Cola, you were... oops... you were actually incorrect. Coke wasn't the leader this year or last. Last year, PepsiCo was the leading stock -- not Coca-Cola, surprisingly. This year, Intel knocked Pepsi from the number one position. Intel is the leader.
In the annual survey, investment clubs reported holding shares of 3,488 different companies across every industry known to man. Fourteen companies advanced five or more positions on the list since last year, including Lucent Technologies (up to #4 from #10), Home Depot (#5 from #11), and Cisco Systems (#6 from #14). On the flip side, Motorola dropped from its number three position to number nine, and Tricon Global Restaurants dropped from 4th to 11th place. Finally, the press release continued, "McDonald's, an NAIC investment club favorite that held on to the number one position for over six years, dropped from number eight in 1998 to the 14th position." The total holdings of NAIC members exceed $64 billion.
The Drip Port has several companies on its watchlist that are widely followed around the country and by investment clubs, including Pfizer, Home Depot, Enron (which we haven't looked at closely yet), Exxon, BP Amoco, Pennzoil-Quaker State, Coca-Cola, and Wrigley.
Before we begin a new study, next week we'll cover the first quarter earnings reports from Intel (Nasdaq: INTC) and Johnson & Johnson (NYSE: JNJ). Intel reports on the 13th. Not coincidentally, the stock splits on the 12th after the market closes. We'll have two shares for every share of Intel we own, and the current price per share will decline to about $65. (Our cost basis will drop to about $40.) Intel is expected to report $1.10 per share in earnings next week -- $0.55 after the split. Johnson & Johnson is slated to shout out from the rooftops $0.80 per share.
Touchstone Friday. George began the week with an excellent column on financial checkups on Monday. He'll continue with more this coming Monday, so keep up! (Apparently, nobody fell for our April Fools Joke, which said we were going to run repeat columns for the next four months. You're too smart -- too Foolish, I should say.)
On Tuesday, we cooked up some thoughts on Campbell Soup (NYSE: CPB) again. Last summer, the company's new plan fees made us cold to investing in Campbell Soup, but we said that we'd consider buying it if the stock became priced attractively enough to compensate for the plan's investment fees. To start, we'd save $200 and invest it at once in order to lessen the impact of the $5 fee. Now the fee isn't the only issue. We're uncertain that we want to buy shares even at these prices because earnings growth is such a question mark for the next year or two, at least. Our money might do better invested elsewhere.
This isn't typically how one does or necessarily should invest in a Drip. Typically, you begin to buy and you buy periodically whatever the situation as long as you believe in a company's long-term potential. The fees make the issue of believing in Campbell more complicated, however. Do we really want to keep investing in Campbell over the years and suffer the fees? We're wrestling with that issue (the fees, still) and we're now wrestling with the company's performance capabilities -- can it grow in the next few years?
In the end, we realize we must reach a conclusion on what to do with Campbell Soup: keep it in the portfolio as a key holding and therefore add to it periodically despite the fees, or dump it for something else with fees and with equal or more promise?
Your thoughts on Campbell Soup are sought on the Drip Companies message board. Please do post if you have an opinion. My current thought is that we need another year or two to see how Campbell's new initiatives take hold and drive earnings growth (or not). We're long-term investors, after all. We'll have more on this periodically, of course. The lower the stock goes, the more interesting it might become.
On Wednesday, Brian wrote about investing and the resources available to all of us (as investors) on the Internet. The slew of resources is both a good and a bad thing. It's necessary to dig out the best and most reliable resources. To find them, you often must sift through reams of noise. On Thursday, Brian wrote about business models (strong business economics) in relation to simplifying your investment decisions. He also announced his first real stock purchase. See the column to learn what Brian is buying.
Have a Foolish weekend. Get some rest away from stocks. Next week: earnings time!
Call Your Boss a Fool.