<THE DRIP PORTFOLIO>
Another industry to consider
by Brian Graney (TMFPanic)
ALEXANDRIA, VA (June 23, 1999) -- As Jeff has mentioned several times in past columns, we are looking for a few good companies to add to our Drip Port. In the weeks to come, we'll examine food and beverage companies in more detail while also squeezing in more analysis of the pharmaceuticals industry. These are two of our favorite industries, based on the knowledge we have already accumulated as investors in J&J and Campbell and our beliefs that the two sectors offer some pretty sound opportunities for market-beating performance over the long-term.
We also like these industries because they are rather static. Consistency, both in earnings growth and in a company's overall business plan, is a desirable thing for an investor with a 20-year time horizon. Mergers and acquisitions will happen along the way, of course, as businesses strive to become more efficient and better competitors on the worldwide stage. Management teams will come and go, new products and markets will be developed, and even the names of the companies themselves may change over time. However, we feel pretty confident that Heinz will still be selling ketchup and Pfizer will still be looking for cures for the world's diseases 20 years from now.
Another industry that has intrigued us as a possible investment area is communications, specifically telecommunications. While boiling the 20th century down to a single theme is intellectually risky if not virtually impossible, scholars the world over could probably make a pretty strong case for calling the last 100 years the "communication century." From the telephone to the radio to the television right on up to the Internet, enhanced means of communication have arguably had a greater impact on more peoples' lives around the globe than perhaps any other idea, concept, or single invention this century.
Unfortunately, the current telecommunications world is a fast-changing area for investors to consider, which is one of the main reasons why we have held off looking at the sector. While we are currently focused on food and drugs, nothing would make us happier than to discover an industry-leading, reasonably priced telecommunications company to invest in regularly over the next two decades. A lot of things may change in the next 100 years, but the desire of individuals to share information, thoughts, and small talk with one another more often and more efficiently will burn on, in our view.
For the Foolish Drippers out there who might also be interested in the telecom area, a good place to start your research might be the American Stock Exchange's North American Telecommunications Index. Cross-checking the index's members with the DRP information at www.moneypaper.com, I developed the following telecom industry study list of possible investments:
With only four of the 17 companies on the list not offering DRPs, there are quite a few telecom stocks from which to choose, including five offering fee-free plans. Keep in mind, however, that several of the companies on this list are in the midst of being acquired by other companies, so this index could look very different six months from now.
Besides the monkey wrench that consolidation throws into the stock-picking process, another possible dilemma I see for interested telecom investors is how to properly stack these companies up against one another. For instance, trying to decide whether Nortel will outperform Lucent over the next two decades is probably hard enough to do. But trying to compare Nortel's outlook to the prospects of a company with an entirely different business direction, such as Sprint, could prove to be even more challenging.
We're up to challenges, of course. That's part of the allure of investing on your own. While we have too much on our analytical plate already with our ongoing looks at the food and beverage and drug industries, we plan to start poking around in the telecom industry in depth sometime soon. In the meantime, hopefully this list (as rough as it is) will provide potential telecom Drippers out there a springboard for some initial research of their own in the sector. Please feel free to share your research or any of your ideas about long term telecom investing in the Drip Companies message board.
Would you work for a bunch of Fools?
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