Drip
Portfolio Report
Friday, June 5, 1998
by Jeff Fischer ([email protected])
Alexandria, VA (June 5, 1998) --This week we added our monthly $100 of savings to the portfolio, while last week we bought $70 worth of Campbell Soup and we're buying $30 worth of Johnson & Johnson with the remaining money.
Intel (Nasdaq: INTC) was big news this week, though it ended the five days down less than $2. Last Friday the company announced that its upcoming Merced chip won't be available until the year 2000, rather than in mid-1999. This has caused analysts to lower earnings estimates, naturally.
The larger point to take away from this experience is Intel's market dominance. Namely, because so many companies are depending on the Merced and are already investing in its architecture, even a half-year delay won't displace Merced as one of the leading high-end microprocessors in the marketplace. Intel's competitive position is far too strong, as are its alliances. Not to mention that no other company is working to produce such a product in mass quantity and aligning business partners to support it the way that Intel is.
Intel's position in the market gives the company some safety even when delaying a major product, just as Microsoft is pretty safe when it delays its new operating systems.
Intel fell again on Wednesday after an H&Q analyst lowered his earnings estimates, but Intel shared that it won't restate its earnings projections for the current quarter, intimating that numbers should be met.
Campbell Soup (NYSE: CPB) had plenty of news this week, too. The company announced a new $2 billion share repurchase program for the next three years, as well as its intention to buy $500 million more in shares on top of that in 1999. In total, this amounts to the company buying back about 8% of its current outstanding shares. Campbell also announced the $123 million sale of its can-making assets to Silgan Holdings, and that David W. Johnson will remain as Chairman of the Board until July 1999 -- which is good news.
Finally, Standard & Poor's affirmed Campbell's debt following the announcement of its share repurchase program, keeping all of Campbell's debt rated in the 'A' category.
The past week. Dale spent the week taking a great close look at First Tennessee National (Nasdaq: FTEN), beginning the review on Monday. Dale continued from Monday by looking closely at the merchant transaction processing business (credit cards) on Tuesday, explaining why companies in this business are often awarded strong valuations by the market. Wednesday I presented a quick article on Intel and the Drip Port's young life. On Thursday, Dale was back in the saddle, wrapping up First Tennessee by looking at its asset turnover. He ended by pointing out that the bank was recently cash flow negative -- needing to invest so much in order to fuel its healthy growth. To my ear, it sounds like Dale will pass on First Tennessee -- but he left it open. It might indeed make the "Final Six." He did in fact have a lot of positive things to say about First Tennessee, overall.
Have a Foolish weekend...
--Jeff Fischer
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