Drip
Portfolio Report
Wednesday, March 4, 1998
by Jeff Fischer
([email protected])
ALEXANDRIA, VA (Mar. 4, 1998) -- Our third purchase, the Campbell Soup Co. (NYSE: CPB), announced that the spin-off of its Vlasic-Swanson division will be completed on March 30. The new company will be called Vlasic Foods International (NYSE: VL) and will have $1.4 billion in annual sales. Our new Campbell company will have over $5.6 billion in sales.
We waited on our purchase of Campbell Soup because we didn't want to receive shares of Vlasic as well. Now we know that Campbell shareholders of record on March 9 will receive one share of Vlasic for every ten shares of Campbell that they own. The Vlasic share distribution will take place on March 30, and more details are available on Campbell's website.
We all know how long it takes for DRPs to begin, so we're probably in the clear to send our money for the Campbell purchase. We probably won't be a shareholder by the end of the month even, not to mention by March 9. So, we'll send our check to get enrolled in the Campbell plan within a week. I'll let everyone know the details soon (where we're sending the money, how much, etc.). Campbell stock has been outperforming, rising from $54 and change to above $58 over the last three weeks. Again, I'll have more details when we send our money to enroll with Campbell next week -- this, our third momentous addition to the Drip Port!
Intel's Annual Report. In the mail on Monday most Intel (Nasdaq: INTC) shareholders received a letter that informed them about electronic voting and, if you wish, the chance to save Intel some paper and mailing costs by accepting an electronic-only version of the company's 1997 annual report. Give the letter a read and head over to the Harris Trust website and this page specifically to accept the electronic offer and allow the company to save some dollars (it might need them!). You'll also then be able to cast your annual shareholder votes electronically. (In the future, probably most DRP programs will be done electronically. It'll be much quicker and save gobs on paperwork and mailing costs. You'll just have to receive some forms for tax reasons.)
If you do want a hardcopy of the Intel annual report, then don't do anything. The report will come to you in the mail unless you consent to the electronic-only version. (More on Intel below.)
Our Next Focus. The fourth industry that the Drip Port is going to study will be the financial services and banking industry. Leading financial companies have been some of the best-performing and highest-yielding stocks this past century. The companies are more sensitive to economic swings than most, but with our time frame we're not overly concerned. Over the long term, these companies make money by knowing how to handle and invest money. Very Foolish.
We'll be considering several household names (like Citicorp, Crestar, and Wells Fargo), but that doesn't mean that these companies are necessarily easy to look at. In fact, the financial industry is one of the more perplexing to analyze and value. The quarterly statements are often a maze of new words and definitions surrounded by big numbers. We're going into new territory, Fools, and what you'll be taught has certainly never been taught anywhere online before -- and probably not even in most colleges, either.
Tackling this task for us will be Dale Wettlaufer (TMF Ralegh) of the Fool's News team. Dale is our financial industry expert, if you will, at the Fool. Soon I'll have a list from Dale of the 15 or so companies that he'll be looking at closely before he narrows it down to only a few choices over the weeks. I'll share the list early so that you can get company information if you wish to follow along closely. I plan to learn just as much as everyone else. After Dale is finished... hey... you could charge people for your ability to analyze financial companies.
Dale will begin by explaining what an investor should look for in the industry, and then he'll show you how to best analyze the companies in general before moving into the individual stocks. This will begin in mid-March. First, we're going to take a close look at Johnson & Johnson's (NYSE: JNJ) 1997 results.
Intel's First Quarter. After the market closed today Intel announced that first quarter revenue and net income will be below expectations. Revenue is expected to decline about 10% from the fourth quarter's $6.5 billion, and gross margins may decline to as low as 53%, as the company expected would happen at some point. The stock is sure to be down sharply tomorrow and the Drip Port with it. This doesn't change any of the long-term conclusions that we developed about Intel over the past three weeks, though, and I'm only reporting on this in a timely fashion because there is a responsibility to do so. We'll survive and we'll cover the quarter, too, of course. This leads into the next paragraph, though, as it relates somewhat...
Correction. Yesterday I stated that if we kept the J&J and Intel positions at the same unequal amounts, after 19 years of appreciation the Intel position would be nearly five times larger than the J&J position. This is true only if we don't add more money to either position, though, which would never happen. If we add $50 to each from here out, of course the size difference between the two would become pretty meaningless as the two positions grow in size over the years. In fact, in 19 years, adding $50 monthly to each holding and if each appreciated 10% annually, we'd have $38,400 of Intel and $35,000 of J&J. But rather than wait years, literally, for the two positions to grow closer in size following an increase in sheer bulk, I still want to work to balance the positions earlier for the several reasons mentioned yesterday.
Consider that if we were to add only $10 per month to each position (assuming a full portfolio at some point), in 19 years Intel would be over 40% larger than J&J. So, evening out the positions now makes sense. Thanks to the Fool who pointed out the glaring need for a clarification.
Future Investments. We'll be diligent in reporting our future monthly investments early whenever we're deviating from a normal routine. I like the steady, normal monthly investments as much as anyone and l look forward to doing that when we can. But for now we need to be more flexible in where we invest so that we can have a somewhat balanced portfolio soon, rather than years from now.
Questions, comments? Please visit the Drip Message Boards, linked in the top right of this page. Have a Foolish evening!
--Jeff
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