Drip Portfolio Report
Friday, January 9, 1998
by Jeff Fischer (JeffF@fool.com)
and Randy Befumo (RandyB@fool.com)


ALEXANDRIA, VA (Jan. 9, 1998) -- It's great to see so many Fools posting their favorite food stocks on the message board. I posted some of my favorites as well, and I'll go over my list today and provide some reasoning behind it. Then I'll give some "update info" (regarding Intel that we recently bought, and money that we sent to buy JNJ). Finally, Randy will wrap up with the week's review.

While it's been a rough year for stocks so far, the Drip Port has held up fine and has a distinct advantage over other portfolios because it dollar cost averages every month. I'm excited about adding a leading food company to the mix, too -- one at an attractive valuation and paying a decent yield. Even in Friday's sharply down market, I look out and see Campbell Soup Co. (NYSE: CPB) and other food stocks treading water. Food is a defensive industry and investors flee to it when the economy looks less than certain. Rather than flee to it, we'll be investing in this steadfast industry for the next twenty years -- and then some, probably.

Randy listed his favorite food companies on Thursday (along with your favorite food companies from the message boards), and he gave the criteria that he's looking for in each. Remember, from the Portfolio's beginnings, some of the qualities that we're looking for are sustainable sales and earnings per share growth in the double digits, double-digit operating and profit margins, consistent share repurchase plans, industry dominance, and much more -- listed here.

My favorite companies for closer study are Campbell Soup (NYSE: CPB), Quaker Oats (NYSE: OAT), Philip Morris (NYSE: MO), PepsiCo (NYSE: PEP), and Anheuser Busch (NYSE: BUD). I'm most interested in Campbell Soup -- for the complete market dominance that it has in the U.S., opportunities overseas, managements' focus on shareholder return, and the company's inherent ability to improve margins and even have some pricing power. Campbell is spinning off its pickle division, as well. Overall in each company, I'm looking at many of the same things as Randy -- ability to grow revenue and margins, the debt-to-sales, yield, value, management initiatives (including dividends, share buybacks, and, importantly, business decisions and direction), leadership, and much more. There are at least a few other companies on our list that I'm interested in too, but those listed above are the first.

It's going to be very interesting as Randy digs deeper into these companies over the coming week. (By the way, as for MO -- my interest is in the valuation and management. We'll discuss the actual business segments and implications later, if it comes to that.)

Before I hand this over to Randy, I want to report that we bought $100 worth of Intel (Nasdaq: INTC) on January 2, but we don't yet know at what price (it was around $70 to $71), so it isn't yet reflected in our performance. Also, if our money got there in time, we should have bought $50 worth of Johnson & Johnson (NYSE: JNJ) on January 7. (JNJ was rated a "buy" from two analyst firms on Thursday, giving the stock a lift). We'll send $50 more to Intel in the next week or two, as well, for our January investment.

Have a great weekend. If you haven't posted your thoughts about food companies on the message board, please do. Here's Randy:

This week we completed the initial survey of food companies and we have come up with a list of four initial finalists -- after providing a complete spreadsheet on all of the companies. The companies that the readers, Jeff, and I all have in common are Campbell Soup, Philip Morris, PepsiCo and Quaker Oats -- pretty much in that order. Next week we will focus on what sort of value each of these companies presents by digging a bit deeper into the financial statements. By the end of the week, we will have looked at the guts of these companies enough to make an investment decision, or at least have a great, heated debate.

FoolWatch -- It's what's going on at the Fool today.

Buy a Book and Get It Signed! -- Book Tour '98


TODAY'S NUMBERS

Stock Close Change INTC $71 7/8 -2 7/16 JNJ $64 5/8 - 3/4
Day Month Year History Drip (1.52%) 0.89% 0.89% (14.08%) S&P 500 (2.97%) (4.40%) (4.40%) (2.49%) Nasdaq (3.36%) (4.28%) (4.28%) (5.68%) Last Rec'd Total # Security In At Current 12/01/97 6.082 INTC $81.346 $71.875 11/14/97 1.000 JNJ $62.125 $64.750 Last Rec'd Total # Security In At Value Change 12/01/97 6.082 INTC $494.72 $437.12 ($57.60) 11/14/97 1.000 JNJ $62.13 $64.75 $2.63 Base: $1100.00 Cash: $489.75** Total: $991.62

The Drip Portfolio has been divided into 46.163 shares with an average purchase price of $23.829 per share.

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.

**Transactions in progress:

Sent $100 to purchase INTC on 12/19/97.

Sent $50 to purchase JNJ on 1/2/98.