Drip Portfolio Report
Thursday, May 21, 1998
by Jeff Fischer (JeffF@fool.com)

Alexandria, VA (May 21, 1998) ---- The stock of Campbell Soup (NYSE: CPB) has risen 10% over the past few weeks, and about 5% since its third quarter earnings announcement on Tuesday. The company reported earnings of $157 million, or $0.34 per share, on sales of $1.57 billion. Campbell missed earnings estimates by a penny, but thankfully investors are focusing on the long-term picture rather than a single penny missing from the last quarter. This is a refreshing change.

The company's conference call is likely responsible for much of the stock's subsequent rise. Campbell is finally beginning to become the company that management wants it to be, with underperforming divisions being sold and the core, higher margin businesses coming into sharper focus. Yet, Campbell still has four divisions that it is in the process of selling or plans to sell (including Delacre Biscuits in Europe, Melbourne Mushrooms in Australia, and Fresh Start bakeries). Also, Campbell's can-making assets from its U.S. thermal plants will be sold in the current quarter.

For the first nine months of the fiscal year, Campbell's sales are up 8%, operating income is up 12%, and earnings per share are up 16%. In the most recent quarter, Campbell bought back 4.5 million shares. Management bought more shares than they otherwise might have because the stock had fallen to the high $40s and they viewed it as an opportunity. The company still plans to buy back 2% of its outstanding shares every year.

Rather than repeat facts here, though, please read the Campbell Soup third quarter conference call summary, in the Fool's conference call area. Those 1,200 information-packed words provide plenty of reading for tonight. I, for one, find it interesting when the company provides the trailing revenue growth for its core businesses only -- meaning, the only businesses that Campbell is actually going to keep! We have on our hands a much smaller company sales-wise, but with strong top-line growth of higher margin products. Enjoy the summary. The next year should be good and interesting for Campbell, but as you read it, think 20 years ahead.

Also moving lately, but in the opposite direction, is the stock of Intel (Nasdaq: INTC). Frankly, this isn't surprising. The company is riding through industry changes -- like a top floating down a gutter flush with water -- and we can't know where or when it will reach dry ground and begin to climb again. Today an analyst had negative comments to share about the current second quarter. This isn't at all surprising, either. The company stated when it announced its first quarter in April that the second quarter would be flat to down, too, and that business wouldn't accelerate until the second half of this year. Perhaps Intel also fell alongside Dell Computer (Nasdaq: DELL). Dell reported earnings yesterday that missed the childish "whisper number," but surpassed published estimates.

Intel, at $74, is trading at 18.8 times next year's earnings estimate of $3.92 per share. Looking elsewhere in the Drip Port, Johnson & Johnson (NYSE: JNJ) is trading at 23 times its 1999 earnings estimate, while Campbell Soup (NYSE: CPB) is trading at 24.8 times its 1999 estimate (Campbell's fiscal year ends in June). Why use the 1999 estimates? Well, we're long-term thinkers. Plus, 1998 is 5/12ths over.

Tomorrow I'll share where the Drip Port is sending it's $100 investment for June. We own $700 worth of Intel, $360 of Johnson & Johnson, and $55 of Campbell. I plan to continue to make these positions closer in size. In the long run, once the portfolio is built, I plan to implement regular (and likely automatic, when possible) payments, so that the Drip Port needn't worry about this every month. I first need to get the money in a bank that will allow automatic payments for free, and so forth. And, again, we need to round out the portfolio before we can put a regular investment plan in place.

Right now, the plan is to send $70 to Campbell and $30 to Johnson & Johnson for next month. We might have plenty o' time to buy Intel, yet again, in the $70s, and we already own plenty of that puppy in relation to the others. Meantime, I'm not going to nit-pick over the current valuations on 1999 earnings estimates.

Fool on!

-Jeff Fischer

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


Stock Close Change CPB $54 7/16 + 1/2 INTC $74 1/8 - 2 7/8 JNJ $70 15/16 - 1/4
Day Month Year History Drip (1.95%) (4.26%) 3.83% (11.58%) S&P 500 (0.39%) 0.26% 14.86% 17.17% Nasdaq (0.59%) (2.54%) 15.96% 14.25% Last Rec'd Total # Security In At Current 04/13/98 1.000 CPB $53.690 $55.438 05/01/98 9.380 INTC $80.487 $74.125 05/07/98 5.099 JNJ $69.154 $70.938 Last Rec'd Total# Security In At Value Change 04/13/98 1.000 CPB $53.69 $55.44 $1.75 05/01/98 9.380 INTC $754.94 $695.27 ($59.67) 05/07/98 5.099 JNJ $352.62 $361.71 $9.10 Base: $1500.00 Cash: $286.12** Total: $1398.53

The Drip Portfolio has been divided into 63.266 shares with an average purchase price of $23.710 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.

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