Drip Portfolio Report
Friday, December 26, 1997
by Jeff Fischer (JeffF@fool.com)

CHICAGO, IL (Dec. 26, 1997) -- On the crest of a New Year, Intel (Nasdaq: INTC) is trading at 17 times its 1998 earnings estimate, and Johnson & Johnson (NYSE: JNJ) trades at 23 times its '98 estimate. So, Intel is trading at a 15% discount to the market multiple of 20, and Johnson & Johnson is slightly above the average market multiple. Both are highly respected industry leaders with great businesses and solid long-term prospects.

Perhaps the primary question for next year is: Can Intel make its '98 numbers? That's a good question, especially in light of the trouble in Asia and the fact that a large amount of Intel's operating earnings comes from that area. Analysts now expect Intel to grow earnings only 9% in the coming year, down significantly from the 31% growth expected this year. Heck, with only 9% earnings growth expected there might even be room for an upside surprise if Intel is lucky, with Windows 98 and the new Windows NT set to launch in 1998. Though with Intel aggressively cutting prices, disk drive makers' woes signaling a slowdown in computer demand, and, again, Asia to consider, it's safest to say that even these earnings estimates are aggressive.

Either way, the possible downside for DRIP investors investing fifty or one hundred dollars every month this coming year can't be very meaningful. Therefore, we're very comfortable, very relaxed, and very happy going into 1998 and investing in our two companies. We like the current stock prices and the long-term business strategies of both Intel and Johnson & Johnson, while the risks involved shouldn't really even hurt us in the near term and almost certainly won't hurt us in the long term, especially being DRIP investors and dollar cost averaging.

In short, it's good to be a DRIP.

This past week was holiday-shortened but we covered significant ground. Monday we nixed Ralcorp Holdings (NYSE: RAH) from our list of food company candidates, at least for now. (With 20 years to go, no decision is ever final. If there is good reason, we'll look again.) Tuesday I rambled about how cold Chicago is, reviewed where we're sending our $100 in January, and mentioned new directions that we want to take this portfolio and the column in 1998. Wednesday Tom Christiansen (TMF Sargon) graced us with a column on accounting for a stock portfolio (he's the mastermind behind our number tracking). If you missed that column, certainly click the Wednesday link above and give it a read. It's relevant for any personal investor looking for a way to track his or her portfolio against the market; or especially for a DRIP investor looking to keep account of numbers every month.

Thursday was of course a holiday, and now here we are on Friday. Enjoy the weekend, Fools, and we'll be back at full speed on Monday. Fool on!


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Stock   Close    Change
INTC  $70 7/8  + 5/8
JNJ   $64 7/8  - 3/16 
            Day        Month      Year      History
Drip         0.41%    (4.39%)   (14.56%)    (14.56%)
S&P 500      0.40%    (1.98%)    26.42%      (1.56%)
Nasdaq       0.79%    (5.57%)    17.07%      (5.17%)

Last Rec'd    Total #    Security    In At    Current
 12/01/97      6.082       INTC     $81.346   $70.875
 11/14/97      1.000       JNJ      $62.125   $64.938

Last Rec'd    Total #    Security    In At     Value    Change
 12/01/97      6.082       INTC     $494.72   $431.04  ($63.68)
 11/14/97      1.000       JNJ       $62.13    $64.94    $2.81 

Base:  $1003.88
Cash:   $393.63**
Total:  $889.61

The Drip Portfolio has been divided into 41.647 shares with an average purchase price of $24.105 per share.

GOAL: The portfolio began with $500 on July 28, 1997, adds $100 on the 15th of every month, and the goal is to have $150,000 in stock by August of the year 2017.