Drip
Portfolio Report
Wednesday, May 20, 1998
by Jeff Fischer ([email protected])
Alexandria, VA (May 20, 1998) ---- On the Drip Port's message board on the Web, a Fool named keats wrote:
"Greetings,
I have finally begun to DRiP,
and I am proud and happy."
With simplicity, this sentence states what the Fool is about in general and what the Drip Port is about specifically: Learning to invest for yourself, on your own terms, in companies that you understand, and hopefully beating the market in the process over the long term. Whether you have $10,000 and prefer to invest only in the Foolish Four, or whether you have only $500 and you want to save and invest $100 per month in DRPs, there is a method of investing that suits any Fool.
In this corner of Fooldom, the Drip Port is nearing its 10-month birthday (hard to believe), but we haven't restated what we aim to do here for quite a while. Today presents an opportunity to share with readers, new and seasoned alike, the fact that we are investing for a 20-year time frame. We don't have a crystal ball, but we're buying companies that we believe have a strong chance of providing market-beating returns. We're investing in these companies through commission-free dividend reinvestment plans, which are easy to set up (they merely require patience), fun to track (they give a feeling of progress each month), and are a great way to build wealth over decades (all dividends are reinvested, and if you're lazy like me, you'll never make the mistake of selling shares -- selling often takes too much work).
In short, you might consider DRPs for your children or friends as gifts. If you're already well on your way down the golden path, share what you know about Foolish investing with others who aren't.
In the Drip Port, our first investment was Intel Corp. (Nasdaq: INTC), which we began to buy in September. As people know, the stock hasn't gone anywhere since then and we've been able to develop a cost basis, so far, of about $80 per share. We've bought the stock at prices ranging from $72 to $94. Intel could easily drift for another year or two and we probably wouldn't be any worse off for it, because we'll be net buyers. Plus, I've been reading The Roaring 2000s recently, and I'm pretty certain that leading computer-related companies are going to grow over the next two decades, not shrink. Intel is a blue-chip company that is actively looking for ways to continue to grow in an industry that offers dozens of opportunities.
We next began to invest in Johnson & Johnson (NYSE: JNJ), a company that all of our parents grew up knowing, and likely their parents before them. Though currently lacking the hot drugs that Pfizer and Merck are sporting, Johnson & Johnson has a wide portfolio of various great drugs accounting for over $8 billion in revenue, and the company is spending more on research and development as a percentage of sales than most blue-chip companies. Over the coming decades, J&J will surely have hot years and some not-so-hot years, but coming off of 65 years of consecutive sales growth, we're betting that Johnson & Johnson will be a larger company, by several factors, come the year 2018 -- and beyond. (There's no need for all of us to cash out of our position after 20 years, unless we plan to have a giant celebration on an island after this is done. However, there certainly should be a "Drip Port 20 Year Party" for everyone to attend when we reach that milestone).
Our third and most recent purchase is Campbell Soup (NYSE: CPB). The Pepperidge Farm, Godiva, Prego, Pace, Campbell Soup company announced earnings yesterday that were one penny below expectations, but the stock has risen since the news. The company continues with its cost-cutting and aggressive marketing plans, including a new agreement with a top-rated cable television channel for kids to sell Campbell soup. I'll provide a summary of the company's quarterly conference call on the Motley Fool tomorrow. Campbell is another leading company that, under the right management, could grow at a market-beating pace over the years.
So what's next for the Drip Port?
Right now Dale is investigating over a dozen leading financial companies to find a banking stock to buy. As money primarily becomes an electronic medium of exchange and as the world becomes much smaller and much more capitalistic, banking promises to be the key impetus behind all of the growth. Without money, countries and companies can't invest. On top of that, Europe will see a unified currency that 11 countries should be using by 2002, and though I doubt that we'll see this for several decades, some day it makes sense that the entire world will have one currency -- a world currency.
Yup, the financial industry is not one that we want to miss. Where else do we plan to invest?
Next up will likely be diversified manufacturing companies, where we'll look for world leaders that crank out boring but necessary items while being run by management that knows how to consistently make great money. Some standout companies include Carlisle (NYSE: CSL), Newell (NYSE: NWL), and Johnson Controls (NYSE: JCI). We also want to consider transportation and heavy machinery and construction companies. Asia has been a boon for companies like Caterpillar (NYSE: CAT), and as you know if you live anywhere near a large city, construction is a constant.
However, before tackling these industries in the coming months, the Drip Port might buy another food and beverage firm. There are a few companies in our 21 food and beverage company overview that I'm still very interested in. One of them could take a perch beside Campbell Soup in our stable of steady, giant food and beverage investments. In fact, I would casually consider our second food stock as a substitute for a utility stock. We will never own a utility stock in the Drip Port because there is so little capital appreciation to hope for. The dividend is large, but that's about it. You can find food companies that are just as stable as utilities (or even more so, in today's day and age!), and that will pay a dividend and grant you stock appreciation as well. You'll probably understand them more than you would a utility, too.
But besides that, why might we buy another company in this industry? Well, the economy is rip-roaring now, but over twenty years there are bound to be harder times during which food and beverage stocks will smell like roses. And finally, we encounter these products every day. For many reasons, we like investing in things that we know so well.
As you build your own Drip Port, buy what you respect and what you understand. Consult the Drip Port's investment criteria to learn what we suggest a Fool should look for in a long-term DRP investment. Build a portfolio at your own pace, and enjoy it and tell others about it, too. If you're new here and you're wondering how to begin a DRP portfolio, visit the Drip Port's information links and then feel free to post any questions on the Drip message boards, which are linked in the top right of this page every day. Later, visit the Drip message boards to talk with others and share ideas as you progress with your Foolish investing.
Tomorrow we'll take a close look at Campbell Soup's recent earnings. I'll summarize the conference call tonight, which will give us plenty of information to chew on. Questions or comments in the meantime? You know where to reach all kinds of Fools, twenty-four hours a day.
Fool on!
--Jeff Fischer
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