DRIP PORTFOLIO
Could Pepsi Be Your Next Coke?

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By Jeff Fischer (TMF Jeff)
June 28, 2000

Results from last Friday's poll show that, of the investors who shared that they're ready to make a decision regarding the food and beverage industry:

40% are beginning to (or already do) Drip PepsiCo (NYSE: PEP)
26% will not begin to invest in any new food or beverage company
23% are beginning to (or already do) Drip Coca-Cola (NYSE: KO)
6% are beginning to (or already do) Drip a different company in the industry
5% are beginning to (or already do) Drip Wrigley (NYSE: WWY)

The intention and purpose of our Drip Port is to educate investors about low-cost direct investing, show how modest amounts of money can compound, and, among several other things, help investors reach a point where they are comfortable and very happy making their own investment decisions. So, it is excellent to see that many of you have made your decisions and are acting on it. You're further along than Brian and I are here in Drip Port!

On Friday, I shared that Brian and I now need to hold a fireside chat at a cafe (at Brian's expense, thank you) to talk about our study and reach a conclusion. Unfortunately, following a rainy weekend of sailing in the Chesapeake Bay, Brian is under the weather and today he isn't at Fool HQ. I did call Brian yesterday evening and this is what transpired:

"Hello Brian, this is Jeff."
Static.... static... (it actually sounded like someone breathing, though).
"Brian who?" Brian finally responded (I could tell that it was him).
"Brian, I know it's you."
"You have the wrong number, Jeff."
"Brian, come on. We need to talk about Pepsi."
[At this point I heard loud music in the background for a moment, alongside laughter. Then it was muffled again.]
"You have the wrong number," Brian said. "There's no Pepsi here."
Click.

So, no luck. Hopefully Brian will show his face in Fool HQ tomorrow. (Seriously, he is ill, and I hope that he feels better soon.)

In the meantime, Fool "ptiny" posted excellent thoughts about Pepsi that I want to highlight today, partly because they mirror many of my thoughts. Ptiny wrote:

"Personally, I find myself of several minds about Pepsi. This is significant, because I find it's a leading indicator to past investment decisions I've come to royally regret. (Even without it, I've made plenty I regret, too). Anyway, I find I do best when I still really believe in a company's model and market after doing the homework.

"In Pepsi's case, I think it may well be the best of the lot we looked at, but I'm just not fully revved. And the fact that I've had it with the overly cutesy girl in the ads (is it just me?) is only the least of it...."

Ptiny continues later in the post:

"To my mind, financial engineering is going to be the real driver behind Pepsi's share price for the next five years. Maybe seven. The thing is, then what?

"I suspect that over the remaining 10 years of the portfolio we'll be left with a bunch of mature brands that may or may not have pricing power (current trends say nyet) battling for incremental share gains domestically, and dependent on overseas expansion for any significant growth.

"In other words, after the financial engineering and efficiency gains are completed, the company will basically be left where Coke is now. Or where Disney (NYSE: DIS) currently finds itself now that the Cap Cities write-offs are exhausted and there's nary a film title left in the library to re-release on video."

To read ptiny's entire post (which is the only way that it should be read), click to the Drip Companies board. The post is great food for thought and it brings to the surface some final issues that we're mulling here, too.

As soon as Brian Graney is able, we'll have more thoughts and then final thoughts to share as we inch (Don't laugh! Investing is a gradual process!) towards an investment conclusion. In the meantime, to discuss our upcoming conclusion visit us on the Drip Companies board. Doing so, you can help Brian and me reach a decision. (You have always helped in the past.)

To close tonight, below are links to Drip Port related news. For instance, Intel (Nasdaq: INTC) unveiled its new and fastest chip today, the Pentium 4. While our second-largest holding, Johnson & Johnson (NYSE: JNJ), rose this week on analyst upgrades and on being put on an analyst's "Hightlighted List," rather than on company news. Finally, there is some news from Mellon (NYSE: MEL) to share.

Be Foolish.

Suggested Links:

  • Intel introduces 1 GHz Pentium 4
  • Mellon signs another electronic bill payment client
  • Drip Portfolio

    6/28/2000 Closing Numbers
    Ticker Company Day Chg % Chg Price
    CPBCAMPBELL SOUP-3/16-0.62%$30.06
    INTCINTEL CORP10.76%$132.38
    JNJJOHNSON & JOHNSON1/160.06%$98.00
    MELMELLON FINANCIAL CORP1/40.66%$38.13

      Day Week Month Year
    To Date
    Since
    7/28/1997
    Annualized
    Drip .51% 2.16% 4.94% 30.57% 69.63% 19.83%
    S&P 500 .29% .93% 2.41% -.98% 54.97% 16.18%
    S&P 500(DA) .29% .93% 2.41% -.98% 57.59% 16.85%
    S&P 500(DCA) n/a n/a n/a n/a 26.37% 8.34%
    NASDAQ 2.11% 2.47% 15.86% -3.17% 151.04% 37.04%

    Trade Date # Shares Ticker Cost/Share Price LT % Val Chg
    9/8/199722.9909INTC45.671$132.38189.85%
    11/14/199715.019JNJ78.956$98.0024.12%
    11/5/199834.9399MEL34.051$38.1311.96%
    4/13/19988.337CPB54.179$30.06-44.51%

    Trade Date # Shares Ticker Cost Value LT $ Val Ch
    9/8/199722.9909INTC$1,050.02$3,043.42$1,993.40
    11/14/199715.019JNJ$1,185.84$1,471.86$286.02
    11/5/199834.9399MEL$1,189.74$1,332.08$142.34
    4/13/19988.337CPB$451.69$250.63($201.06)
      Cash: $0.08  
      Total: $6,098.08  


    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.