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DRIP PORTFOLIO
Researching Telecommunications

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By George Runkle (TMF Runkle)
May 8, 2000

This past week, I spoke to Nortel Networks (NYSE: NT) and in our discussions I was pointed toward some other people to talk to. So, before I tackle this subject any further, I'll make some more phone calls and try to boil everything down to a comprehensible form that will fit in this column. One of the difficulties in writing about telecommunications equipment companies is covering the broad scope of what they do, while getting a grasp of the technology itself is a challenge.

Therefore, investing in these companies isn't something that takes only 15 minutes a month. There are several areas to be mastered and understood. First, you need to understand the industry's terminology. Then there are the basic ideas behind the different technologies, such as the difference between ATM and IP. Finally, we need an understanding of where the industry is headed.

I spoke a little last week about an excellent industry book that I read; today I'll go offer a few others. Also, after last week's column, some Fools recommended some other books that you may wish to consider.

First, there is The Essential Guide to Telecommunications by Annabel Z. Dodd. This book is written for those who have little or no technical background. It's an easy-to-read overview of much of the technology available now and great if you have no patience for technical terminology.

For those of you that are more technically proficient, there is Fundamentals of Telecommunications by Roger L. Freeman. This book supposedly assumes "no mathematical or technical know-how on the part of the reader." Well, I disagree with that, as it gets into trigonometry, binary numbers, and logarithms, which would probably intimidate a lot of people. However, if you have a technical background, you may really enjoy this book -- I did. I liked the depth with which it covered different subjects, which was something I wanted as an engineer. It wasn't so deep that I felt I was going in over my head, which was important to me, since I am not in the telecom business.

The writer starts with the basics of how a phone works, and takes you through analog and digital transmission. He covers many different areas, such as optical networks, microwave transmission, and ATM in a fairly comprehensive manner. The book is $105 on Amazon.com, but if it helps you to find and understand investments in the industry, it may be worth the price.

My favorite book is the one I linked to last week, Understanding Telecommunications and Lightwave Systems by John G. Nellist. This book doesn't require a heavy math and physical sciences background, although it would help if you aren't totally intimidated by numbers. If I had to choose one of the above three, this is the one. The author works forward from the basics of telephones to optical networks. It's not heavy in technical detail, but he does explain the technology well enough to bring you to a basic understanding. This book is especially strong in explaining fiber optics, without blinding you with the physics of light.

Two others that have been recommended by Fools who have been kind enough to write to me are (I've ordered them both, I'll review them here after I read them):

  • Voice Over IP Fundamentals by Davidson, Peters, Gracely, and Peters. This was highly recommended by a Fool with IEEE (Institute of Electrical and Electronics Engineers), and it is the #2 most popular book ordered by people at Cisco Systems (Nasdaq: CSCO) from Amazon.

  • Second is Newton's Telecom Dictionary by Harry Newton and Ray Horak. A number of people who work in the telecomm industry have recommended this book to me. It also carries high marks from reviewers on Amazon, so I'm checking this one out, too.

Over the next few weeks I will be in Korea, so we'll go a bit off the trail from the Pathfinder companies during that time. I'll be still on the Fool, so please feel free to write me with your ideas and comments, or post them on the Drip discussion boards linked below. In the meantime, stay Foolish.

Drip Portfolio

5/8/2000 Closing Numbers
Ticker Company Day Chg % Chg Price
CPBCAMPBELL SOUP1/83.96%$29.50
INTCINTEL CORP-5 3/4-4.66%$117.63
JNJJOHNSON & JOHNSON3/44.46%$87.75
MELMELLON FINANCIAL CORP3/42.38%$32.25

  Day Week Month Year
To Date
Since
7/28/1997
Annualized
Drip -.81% -.81% -1.85% 15.17% 49.63% 15.59%
S&P 500 -.59% -.59% -1.95% -3.07% 51.70% 16.16%
S&P 500(DA) -.59% -.59% -1.95% -3.07% 54.33% 16.88%
S&P 500(DCA) n/a n/a n/a n/a 24.45% 8.18%
NASDAQ -3.86% -3.86% -4.95% -9.83% 133.78% 35.70%

Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
9/8/199722.9859INTC45.653$117.63157.65%
11/14/199714.965JNJ78.923$87.7511.19%
11/5/199831.5773MEL34.290$32.25-5.95%
4/13/19988.269CPB54.401$29.50-45.77%

Trade Date # Shares Ticker Cost Value LT $ Val Ch
9/8/199722.9859INTC$1,049.37$2,703.72$1,654.35
11/14/199714.965JNJ$1,181.08$1,313.18$132.10
11/5/199831.5773MEL$1,082.79$1,018.37($64.43)
4/13/19988.269CPB$449.84$243.94($205.90)
  Cash: $0.01  
  Total: $5,279.21  


Key
• S&P 500 (DA) = dividend adjusted. Dividends have been added to the total return of the index.

Note
Drip Port launched with $500 on July 28, 1997, adds $100 to invest every month, and the goal is to own $150,000 in stock by August of the year 2017. Due to the slow nature of dollar-cost-averaging and our relatively significant starting costs, we do not expect to seriously challenge the S&P 500 for the first three to five years as we build an investment base. The long-term advantages of dollar-cost-averaging still overcome the short-term disadvantages, however. Final note: our investment in Campbell Soup is frozen due to fees instituted in its investment plan. Click here for a history of all Drip Port transactions.





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