<THE DRIP PORTFOLIO>
I Know Wal-Mart
Plus, a New Step in the Screen
by George Runkle (TMFRunkle)
Atlanta, GA (July 26, 1999) -- Last week I covered my tried and true method of selecting stocks. It's the "I Love This Company" system of selecting companies. I typically have done the following (as a recap):
Step One, you find a company that has a product or service you really like.
Step Two, you check to see if it has a Drip.
Step Three, you buy the first share or make the minimum investment to get into the Drip.
Step Four is to remember to look at its numbers after you've already enrolled in the plan. (Of course, the order of Step Three and Four will be addressed in a moment.)
On the Drip board, Fool GLSmythe pointed out the high fees I could be paying for Wal-Mart (NYSE: WMT) stock. He is correct. I'm paying a $1 transaction fee, but with a $25 investment, the percentage comes out very high. If you add the $20 setup fee, it gets even worse. Really, to keep costs down, I should be investing at least $50 a month in Wal-Mart (keeping the fee to 2.5%), and ideally more. So, let's add this step: Check the fees for the plan. This should be done before Step Three, which really should be Step Four. Confused? You should be.
Let's go through the steps as they should be:
- Step One, you find a company that has a product or service you really like.
- Step Two, you check to see if it has a Drip.
- Step Three, check the Drip fees to see if they are reasonable, and how much you should invest to keep them reasonable.
- Step Four, is to look at its numbers BEFORE you've enrolled in the plan.
- Step Five, you buy the first share or make the minimum investment to get into the Drip.
I promise I will do it this way in the future. Really.
Now, let's take a look at Wal-Mart and see why I so rashly bought this company. First, go check this link to see some of its earnings estimates. I'll wait. I have some other stuff to do anyway....
That was pretty quick and painless, wasn't it? As you can see, the long-term growth in earnings is 14.48%, which is pretty good. If you wish, check out the financials and snapshot too, accessible from that same page. Now let's go on.
Do you remember what an agony it used to be to walk into one of the old discount stores? As soon as you went in the door, you were assaulted by the smell of stale popcorn. The items for sale were stuffed on the shelves in no apparent order, and most of the stock seemed to be brightly colored plastic stuff. The "sales staff" (tee hee) acted like they wished you were someplace else. What else could you do? You could go to shopping malls, or search around for specialty stores for the things you wanted -- unless you wanted brightly colored plastic stuff. However, getting good items at a discounted price could be a chore.
Into the fray jumped Sam Walton. He came up with a revolutionary idea. I have to admit, I don't know or care what that idea was. I just know that I can go to the Wal-Mart down the street from me 24 hours a day and buy just about everything. I think they even have shiny plastic things should the need arise. I bought my Hewlett Packard (NYSE: HWP) ink-jet printer there, my fishing license, bird feed for my Fool birds (Captain Nemo and Captain Ahab), different tools, and various other odds and ends around the house. Instead of cheap junk, they sell quality items at a discount (hmm... no big tables full of $10 "Famous Maker" sneakers). The staff is very pleasant. I noticed in a lot of Wal-Marts they hire senior citizens, and for some reason they lack the arrogant indifference that a staff of teenagers will develop.
The Wal-Mart near me has a McDonald's (NYSE: MCD), so if you have a mind for a burger, you can eat right there. They have soda machines out front selling drinks at a low price. Overall, it gives you a comfortable feeling, making you want to stay and shop. The concept is very good, and guess where I shop all the time? So, this is a company I know. What companies can you think of that you know and love? Post them on the Drip Companies board.
Call Your Boss a Fool.
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