DRIP PORTFOLIO
Your Food & Beverage Pick

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By Jeff Fischer (TMF Jeff)
June 23, 2000

Last week we ran PepsiCo (NYSE: PEP) through the 11 Rule Maker criteria and it passed about 8.8 of the tests. Afterward, we asked you what you thought of the results. Were the results good enough to merit the inclusion of Pepsi in the Drip Port based on the Rule Maker criteria? Forty-four percent of you said "yes." The complete survey results to the question "Were Pepsi's results good enough" were:

24% -- No, Pepsi should pass all 11 Rule Maker criteria, so it fails.
44% -- Yes, that's close enough. Pepsi looks good.
27% -- It's okay, but I'm worried about Pepsi's sales growth.
5% -- Pepsi passed most all Drip criteria, so that's all that matters.

In a survey one week earlier, we asked you which food and beverage finalist in our industry study you liked best. You answered:

55% -- Pepsi
26% -- Coca-Cola
10% -- Wrigley
7% -- No food & beverage company at all
2% -- A different food & beverage company

This second survey took place after we had focused on Pepsi and not on the other candidates for over three weeks, so the results are logically skewed to Pepsi's favor. Even allowing for that, though, the two surveys indicate that of our Drip Port readership who voted, Pepsi is favored as the next investment -- an investment that will essentially replace Campbell Soup (NYSE: CPB).

Brian and I have looked at Pepsi for a long time and from many angles, all of them shared online as much as possible, but we still need to converse a final time to form a conclusion. So, we'll head to a cafe soon, away from the hustle of Fool HQ, and Brian will proceed to buy me drinks and food, and we'll talk about Pepsi. And Wrigley. And Coca-Cola. And Brian's pet dog, Guiness. And when we finally stumble back to HQ (because tea has an intoxicating effect when drunk by the barrel-full), we should have a conclusion and good reasons to support it. And then we'll share all of them right here.

This should happen next week. Yes, next week we should finally have a decision, whether it is a call to action or not.

First, though, two points that Brian raised with me this week were legitimate concerns. He wondered whether we really knew the company well enough yet. Maybe we didn't really know Pepsi nearly as well as we should. Plus, it seems that the word is "out" regarding the positive changes at the company, especially following cover stories in Business Week and Barron's. So perhaps our opportunity to start buying it at a good price passed us by during the last 18 months when the stock hovered around the mid-$30s.

My response to the first concern, about our lack of some knowledge, is paraphrased by these words from Alan Watts: "To the mind which pursues every road to its end, every road leads nowhere. To abstain is not to postpone the cold disillusionment of the true facts but to see that one arrives by staying rather than going, that to be forever looking 'beyond' is to remain blind to what is here."

Those words may apply better to living than to investing, but truly they apply to both. We could continue to pursue road after road of knowledge in our study of Pepsi, and we would find that every road would lead to yet another road, and that more knowledge would only demand still more knowledge, so that essentially we would end up nowhere. In a nutshell, at some point, you simply have to take a leap. Make the plunge. Knowledge is always imperfect in any life venture, including investing. If you seek perfect knowledge, you'll only find, perhaps too late, that you can never obtain it.

My second thought about Pepsi's share price revolves around dollar cost averaging (DCA). As with Intel and Johnson & Johnson, if we decide to buy Pepsi, we can attempt to average into our investment more so when the price dips. Naturally, we'll always buy more shares when the stock is at a lower price, so the DCA process automatically works in our favor. So, I'm not that concerned about Pepsi's $7 share price rise from last year (even though that is about 20%) on the outset of our 17-year DCA investment.

All in all, next week we should be able to share our final thoughts on the matter. Our knowledge of what will occur next week is imperfect, however, so an outcome may prove to require yet more time. We'll see how our talks and subsequent writing go and we will aim for an efficient conclusion. For right now, it's your turn.

Your Turn:
If you've followed the Drip Port's food and beverage study and you're ready to make your investment decision on the matter, what are you going to do for your portfolio? Answer the poll here! (If your answer doesn't fit into any of the choices provided, please just post what you're doing.)

Related Links:

  • Rule Maker's 11 Criteria
  • Rule Maker Investment Seminar
  • Drip Port Investing Criteria
  • Drip Portfolio

    6/23/2000 Closing Numbers
    Ticker Company Day Chg % Chg Price
    CPBCAMPBELL SOUP1/21.69%$30.00
    INTCINTEL CORP5/160.23%$134.38
    JNJJOHNSON & JOHNSON3/161.34%$89.75
    MELMELLON FINANCIAL CORP7/161.21%$36.69

      Day Week Month Year
    To Date
    Since
    7/28/1997
    Annualized
    Drip .75% 5.24% 2.64% 27.71% 65.91% 19.02%
    S&P 500 -.74% -1.57% 1.47% -1.89% 53.55% 15.89%
    S&P 500(DA) -.74% -1.57% 1.47% -1.89% 56.17% 16.57%
    S&P 500(DCA) n/a n/a n/a n/a 25.24% 8.05%
    NASDAQ -2.32% -.39% 13.07% -5.50% 144.99% 36.09%

    Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
    9/8/199722.9909INTC45.671$134.38194.22%
    11/14/199714.965JNJ78.923$89.7513.72%
    11/5/199834.9399MEL34.051$36.697.74%
    4/13/19988.337CPB54.179$30.00-44.63%

    Trade Date # Shares Ticker Cost Value LT $ Val Ch
    9/8/199722.9909INTC$1,050.02$3,089.40$2,039.39
    11/14/199714.965JNJ$1,181.08$1,343.11$162.03
    11/5/199834.9399MEL$1,189.74$1,281.86$92.11
    4/13/19988.337CPB$451.69$250.11($201.58)
      Cash: $0.05  
      Total: $5,964.53  


    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.