Drip
Portfolio Report
Monday, November 17, 1997
by Jeff Fischer
(TMFJeff@aol.com)
ALEXANDRIA, VA (Nov. 17, 1997) -- At my sixty-four room estate on the outskirts of Alexandria, Virginia, the mailperson drove his truck up the six-mile driveway, past the twelve horse stables, the pool, and the tennis courts, and delivered our Intel (NYSE: INTC) statement into my gold-plated mailbox. The statement shows our latest purchase. We bought 30,000 shares of Intel at $78.21 each, surpassing the maximum investment allowed each month by over $2.3 million.
SLAP!
Poof!
In reality, a mailperson stopped by my three-room apartment that dates back to the year 1860 and sits in the middle of Old Town and he stuffed the crumpled Intel statement into the metal lockbox in the entry. On November 3, Harris Trust bought us 3.8355 shares of Intel at $78.2161 each, exhausting our entire $300.00 optional investment with one puny trade ($300 is $14,700 below the maximum amount allowed per month). But at least the puny investment will not be sold for at least twenty years, and when we do sell, it will be a large trade. The Drip Port now owns 4.8355 shares of Intel at an average cost of $81.62 each, for a total cost of $394.67. Welcome to your new home, Intel Corp. We're in this marriage for the long run.
And we're two-timing. Our second "spouse" is a large healthcare company.
On Friday we learned from Moneypaper that our first share of Johnson & Johnson (NYSE: JNJ) was bought at $60.56. (Moneypaper posted the information on the Fool message boards.) And one more update: On Saturday, the 15th of the month, we added another $100 in monthly savings to the portfolio. This month we'll probably send the $100 to Intel again rather Johnson & Johnson, as it's not likely that the J&J account will be ready in time. We'll send that $100 by the end of this week.
Some folks are interested in setting up automatic investing plans with their DRIP stocks, which we consider a great idea. Automatic payments are a Foolish way to save regularly each month and to invest without any hassle. Intel offers auto investment plans and withdraws money electronically from your checking or savings account periodically (see your original Intel statement to call or write Harris Trust for the forms that will set up automatic investing for you). Johnson & Johnson also offers auto investing plans for a $1 fee each time (which is hardly more than the cost of an envelope, bank check, and stamp).
At the Drip Port, we'll likely set up these types of auto arrangements once we have a full portfolio and can lay out a regular investment schedule for each month. We'll also aim to add more money to our favorite stocks when they're lower, manually. Of course, we think that each Fool should do exactly as he or she sees fit. Many of you are saving and investing more than $100 per month, which is great. We'll almost certainly increase our amount of monthly savings someday, too, and increase our final goal of $150,000 accordingly. Anyway, for today, the new numbers are updated to reflect the Intel and Johnson & Johnson purchases, as well as the $100 added to the portfolio. If you have any Dripping questions that can't be answered on the message boards for everyone else to see and benefit from as well, please let us know at our email addresses. Of course, in general, any email is always welcome!
Today we'll continue with our walk down the food aisle, looking at leading food and beverage companies for a possible investment. Randy listed the companies that we're considering, and I'll start my list alphabetically, beginning with "The King":
Anheuser Busch (NYSE: BUD)
Description: Founded in 1852 (so, it's older than my apartment), Anheuser Busch is the largest beer brewer in the country, controlling 45% of the market. The company makes Budweiser, Bud Light, Busch, and Michelob, as well as over 35 other specialty beers including Red Wolf Lager (which is supposed to be made by some tiny brewer in a wooded cabin somewhere). Having sold its snack food and baking divisions, as well as the St. Louis Cardinals baseball team, Anheuser Busch still -- perhaps oddly -- operates theme parks. With Busch Gardens, Sea World, and other parks, the self-proclaimed King of Beers is actually one of the largest theme park companies in the country. Anheuser is also the second largest manufacturer of aluminum beverage cans in the country, and the largest recycler of those cans in the entire world.
Major brands: Budweiser is the number one selling beer in the country. The company also sells (some were mentioned above) Bud Light, Michelob, Busch, O'Douls, Red Wolf, Natural Light, Carlsberg, Kirin, Elephant, and others. Further, Anheuser owns 37% of Grupo Modelo, which produces the number one beer in Mexico, Corona, and 25% of Redhook brewery distribution. The company has several joint ventures promoting its 8% international market share, and it's looking to increase that market share through aggressive advertising and by investing in top oversea brewers. In entertainment, the company owns Sea World, Busch Gardens, Sesame Place, and Baseball City Sports Complex, among others.
Core money maker: 93% of revenue and net income is derived from beer and beer-related sales, while only 7% comes from entertainment and theme parks.
Financials: As this is an overview, we'll only look at a few key things: how is the company currently priced relative to sales and earnings per share and the expected growth rate (valuation); what are the current operating and net margins (margins); how much long-term debt does the company have (leverage); and what does management do with the cash it generates (capital allocation).
The stock trades at 18 times earnings and yields 2.40%. We'll look at Bud's numbers tomorrow and draw an initial conclusion on the investment possibility. Have a Foolish evening!
--Jeff Fischer
Have You Given? The Fool Charity Fund
TODAY'S NUMBERS
Day Month Year History Drip (0.49%) (0.24%) (9.11%) (9.11%) S&P 500 1.92% 3.45% 27.74% (0.54%) Nasdaq 1.93% 1.29% 25.02% 1.27% Last Rec'd Total # Security Avg. In At Current 11/03/97 4.835 INTC $81.623 $80.438 11/14/97 1.000 JNJ $60.560 $63.438 Last Rec'd Total # Security In At Value Change 11/03/97 4.835 INTC $394.69 $388.96 ($5.73) 11/14/97 1.000 JNJ $60.56 $63.44 $2.88 Base: $900.00 Cash: $389.75** Total: $842.15 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: None. The Drip Portfolio has been divided into |