Drip Portfolio Report
Friday, September 12, 1997
by Randy Befumo (TMF Templr)
ALEXANDRIA, VA (Sept. 12, 1997) -- Direct investing is investing at the speed of ice melting. Forty-seven days ago we commenced to build what Tom Gardner affectionately called "America's Portfolio," a portfolio composed of direct investment and dividend reinvestment plans that would prove to investors that they could create wealth even with a small initial investment of a few hundred dollars and a few bucks a month.
Over the last 47 days (on 34 of which we've written columns) we have turned over quite a few investment rocks. I have looked closely at INTEL CORP. (Nasdaq: INTC), COCA-COLA (NYSE: KO), and OWENS CORNING (NYSE: OWC), rejecting all but the first for consideration. Jeff has looked at even more companies and is currently closing in on one global healthcare product provider out of the four that he is analyzing, after narrowing the four down from eight to choose from. All told, we have initially considered over ten companies to get only one so far.
Although this might seem like a slow pace, I can assure readers that it is not out of the ordinary at all. On average, for every ten companies you look at, only one or two merit further consideration and normally only one, if that, eventually makes sense as a purchase. The game of investing, as Peter Lynch as said, goes to those who turn over the most stones. If you look at a hundred investments, you will find ten ideas. A thousand, maybe one hundred ideas.
Is all this time looking at companies that we do not purchase wasted? Hardly. First of all, if you research properly, you will often wind up looking at the competitors and customers of the company you initially identified. This familiarity can often generate further investment ideas that are actually superior to the initial one. Secondly, even if you don't buy a company today, knowing something about it makes you better equipped to buy it tomorrow. After you spend a few months, or even years, getting familiar with a company, you can often find yourself buying it at two or three times the price it was when you initially looked at it just because you understand it better and can be more confident in the future prospects.
One of the advantages Jeff and I have is that not only can we interact with one another at the office and trade ideas, but we can bounce ideas off the entire analyst team at Fool HQ. From Dale Wettlaufer to Alex Schay to Brian Bauer to Tom and David Gardner, we engage in a collaborative learning exercise almost every day. This is why I think investment clubs are such great opportunities for investors. The National Association of Investors Corp. has shown that although the average member has $95,000 in their investment club, they have three times as much in their personal portfolio and uses the club to learn about new ideas in investing and new companies to invest in.
A lot of great Fools on both the America Online and Web DRP boards have been doing just this, conducting a national investment club for all to see. The discussion out there on the message boards has been incredible, and if you are reading this, you should check it out by clicking here. Right now the discussion of ideas is mixed up in the discussion of what DRPs are, but Community Manager David Forrest (TMF Bogey) is considering a change. If you want two DRP folders, one for basic questions and one for discussing possible investments, e-mail us here at the Fool by clicking here and let us know. Just title the note "The DRP Folder" or somesuch and we will modify the board the way you folks want it.
In summation, my message here is twofold. First, investing is hard work and we will probably take quite a while to have a full portfolio of eight positions. Hopefully the work we do toward achieving this will help make all of us better investors. Jeff and I are committed to doing every due diligence in this portfolio. The second point is that the conversation about what DRPs to own is going on right now on our message boards. Rather than simply mimic the Dripfolio, you may want to venture out on your own with the support of the teeming thousands reading the DRP message boards and begin to analyze companies as we have.