Drip
Portfolio Report
Thursday, November 13, 1997
by Jeff Fischer
([email protected])
ALEXANDRIA, VA (Nov. 13, 1997) -- The Drip Port rose 0.41% today and is now down 8.78% since inception (due primarily to start-up costs), while the S&P has lost 3.65% over the same period. As our investing base grows and as we begin to invest for free each month, the start-up costs will shrink in importance -- nearly to zero. We're updating the performance numbers each day, and we're working on the program to place the numbers online each day, too. What's keeping track of our numbers? The new Port Tracker is DRIP friendly. The spreadsheet accounts for dividend reinvestments, expenses, different cost-bases, and shows how your stocks and portfolio perform against the market. It also tracks normal stock holdings as well, and there is constant Foolish online support for the product if you have questions. [email protected] is the man to email.
Speedy Drip update: The portfolio's first investment was Intel (Nasdaq: INTC) and the second was Johnson & Johnson (NYSE: JNJ). We sent an additional $300 to Intel last month and we should receive an Intel statement with the purchase price soon. The transfer agent bought Intel for everyone on November 3, so we paid near $76 per share. (The portfolio actually gained more today, because the nearly four new shares of Intel weren't included in today's gain.) We'll add our monthly $100 to the portfolio in two days, on the 15th, and that money will probably be sent to Johnson & Johnson by the end of the month.
Pfizer, Inc. (NYSE: PFE): One company that we agreed to monitor following our healthcare overview is Pfizer. With the most impressive pipeline of any large pharmaceutical company, Pfizer's stock has great expectations built into the price. At $69, Pfizer trades at 42 times trailing earnings and 35 times estimates of $2.01 per share for fiscal 1998. The company is expected to grow 16% annually over the next five years. By comparison, Johnson & Johnson trades at 21 times 1998 estimates, is expected to grow 14% annually over the next five years, and pays a dividend yield 0.5% higher than Pfizer. That said, Pfizer has the pipeline to fuel serious growth in the near-term and the momentum to keep growing handily down the road.
In total, both stocks offer interesting potential when looking out five, ten, or twenty years. Or longer. Pfizer should have three new drugs on the market in 1998, including Viagra, which could easily be one of the company's best sellers. Moving into the new century -- the big 2-0-0-0 -- Pfizer has over a dozen drugs that should be nearing late development or going to market.
Johnson & Johnson and Pfizer both announced earnings in mid-October, and we covered J&J's earnings nine days ago. The company grew earnings per share 14.3% on a 3.4% increase in sales. Sales were affected by international currencies, but margins improved across the board. Pfizer, meanwhile, announced that third quarter earnings per share rose 15% on a 10% increase in revenue. The increase in revenue was mainly volume driven (up 13%) and was also affected negatively by currency issues.
Pfizer reported revenue of $3.09 billion and net income of $596 million. For the past nine months the company earned $9 billion in revenue and $1.65 billion in net income, increases of 11% and 16% over last year. Earnings per share rose 14% over this time period compared to last year.
Pfizer's earnings reports are easily some of the best quarterly press releases from any public company based on content alone. The third quarter press release is sixteen pages long and breaks all of the sales and product growth down by division and drug. Perhaps most helpful, though, is the second half of the report, which answers over two dozen common questions from investors -- a total nine pages worth of explanation about the company and the recent and projected performance. Pfizer is a great example of a public company being truly public. If you're interested in the company or already own shares, the press release is a must read. We know that many readers of the Drip Port first invested in Pfizer rather than Johnson & Johnson -- or invested in both companies.
Tomorrow we'll look at what Pfizer sold and what its margins were for the past nine months. When we looked at Johnson & Johnson recently we found that margins had improved on every level to: 68.9% gross, 22.3% operating, and 15.7% net margins. Why are margins so important? They show how management is running the business and can be an early indicator of coming weakness on any level: product costs, operating costs, or other concerns. If you're interested in Pfizer, please give the press release a read (linked above) to get an overview of what we'll discuss tomorrow regarding the third quarter. After Pfizer, we'll continue rummaging through food and drink companies for a great twenty-year investment.
Fool on!
--Jeff Fischer
TODAY'S NUMBERS
Stock Close Change
Intel $77 15/16 +3
Day Month Year History
Drip: 0.41% 0.13% (8.78%) (8.78%)
S&P: 1.18% 0.22% 23.75% (3.65%)
NASDAQ: 1.04% (2.25%) 20.66% (2.26%)
Rec'd # Security In At
9/8/97 1 Intel $94.69
Base: $800.00
Cash: $665.31**
Total: $743.25
GOAL: The portfolio began with $500 on July 28, 1997,
adds $100 on the 15th of every month, and the goal
is to grow the port to $150,000 by August of the year 2017.
**Transactions in progress:
1. $81.00 sent on 10/17/97 to buy one share of JNJ and
enroll in its DRIP.
2. $300.00 sent on 10/23/97 to buy more shares of INTC.
The Drip Portfolio has been divided into
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