Drip Portfolio Report
Friday, February 20, 1998
by Jeff Fischer (JeffF@fool.com)

ALEXANDRIA, VA (Feb. 20, 1998) -- The week was shortened thanks to Presidents' Day, but we still had a Foolish four days. We primarily covered Intel Corp. (Nasdaq: INTC). The stock rose over six dollars this week and closed above $90 for the first time since last October. Our cost basis on the stock so far is $79.92.

Tuesday we looked at Intel's business and how the company is decreasing costs, as always, by moving to the latest in micron technology. With the changeover, Intel should be able to produce about 200 Pentium II chips per wafer rather than just 125, cutting costs significantly. Pentium II chips should constitute about 50% of Intel's microprocessor output by midyear. This is good, as the Pentium II is one of the company's higher-margin chips.

Tuesday we also touched on the fact that some people see low-end PCs as a potential threat to Intel's margins and profitability, while others see the sub-$1000 PC segment (called segment zero) as an opportunity. If anything, less expensive PCs will increase sales for the total PC market. Selling networking, videoconferencing, and other PC-related items, Intel is working to be less dependent on microprocessors alone, though the company is probably years away from having more diversified streams of significant revenue.

In that light, Wednesday we considered Intel's near future, primarily in relation to Microsoft (Nasdaq: MSFT) software that is being released in the next two years. Along with that, the server and workstation market is expected to grow 35% to 40% annually near term, and Intel should be in a position to capture some of that growth with its high-end 1999 Merced chip.

Wednesday the Campbell Soup Co. (NYSE: CPB) was also mentioned in light of the company's increased cost-savings initiatives that it announced. Campbell is selling the assets of four of its can-making operations for $125 million. The company also aims to reduce costs by $150 million per year rather than just $100 million -- its previous goal. Last quarter's earnings were in line with estimates, and we should know more about the Vlasic Foods spin-off soon. When we send money to buy our first share of Campbell Soup in the near future, we'll be using the services of The Moneypaper.

Thursday we discussed Intel's stock valuation, finding it reasonable rather than inexpensive. Several analysts have rated the stock a "buy" in recent weeks. Intel trades at 23 times 1998 earnings estimates and 20 times 1999 estimates. Thursday's column also looked at the Drip Port's performance (up over 16% this year), and mentioned that we'll send $50 to both the Intel and Johnson & Johnson (NYSE: JNJ) dividend reinvestment plans this week. I'll mail those $50 checks tomorrow, on Saturday.

Please be aware that both companies offer automatic investment plans, whereby their banks regularly withdraw a set amount of money from your checking or savings account to buy stock for you. The Johnson & Johnson plan has a $1.00 fee for the wire, while Intel's plan is free. This makes your regular investments automatic, meaning that you don't need to mail anything. Many Fools use this service. I'm keeping the amount that the Drip Port sends each month in my hands, though, as we're still building the port and so can't commit to anything regular yet. Also, as stated Thursday, we might send $100 to J & J for a few months to make that position more equal in size to Intel, our first (and largest) holding. Johnson & Johnson made a new high above $70 this week. The stock trades at 22 times 1999 earnings estimates and 25 times this year's estimate.

Well, you might be thrilled to know that we're just about finished with our current look at Intel. We'll next look at the competition and Intel's products aside from microprocessors (and surely some other topics will arise). Then, maybe -- just maybe -- we'll move away from Intel again! After all, Intel's next quarter will be announced around April 14 and we have other ground to cover before then. (Of course, spending all of last week on Campbell Soup makes it seem as if we've been covering Intel for longer than we actually have.)

So, friends, I'm sending our two $50 checks tomorrow and we'll add $100 to the portfolio on March 1. If you have questions about Intel, or Campbell, or anything, please visit the message boards, where an answer is often literally minutes away, usually coming from a few helpful Fools. Vince Hanks (TMF Elwood) and I are on the boards regularly, too. The boards are always linked in the top right of this page.

Have a great weekend!


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


Stock Close Change INTC $91 13/16 +1 1/4 JNJ $70 1/16 -1/2
Day Month Year History Drip 0.71% 7.88% 16.75% (0.57%) S&P 500 0.58% 5.50% 6.57% 8.71% Nasdaq 0.06% 6.72% 10.05% 8.43% Last Rec'd Total # Security In At Current 02/02/98 8.066 INTC $79.929 $91.813 02/09/98 2.498 JNJ $64.902 $70.063 Last Rec'd Total# Security In At Value Change 02/02/98 8.066 INTC $644.72 $740.58 $95.86 02/09/98 2.498 JNJ $162.13 $175.02 $12.89 Base: $1200.00 Cash: $339.75** Total: $1255.34

The Drip Portfolio has been divided into 50.503 shares with an average purchase price of $23.761 per share.

The portfolio began with $500 on July 28, 1997, adds $100 on the 1st of every month, and the goal is to have $150,000 in stock by August of the year 2017.

**Transactions in progress:

2/21/98: Sending $50 to buy INTC.

2/21/98: Sending $50 to buy JNJ.