Drip Portfolio Report
Wednesday, June 10, 1998
by Dale Wettlaufer ( DaleW@fool.com)


Alexandria, VA (June 10, 1998) --By now, Fools who have been following this series of articles on financial services companies should be well-versed in analyzing the basics of a company's financials and its productivity. I saved Merrill Lynch (NYSE: MER) for a while because it was in the middle of some large acquisitions earlier this year and because its situation is kind of different with regard to leverage. The company accumulated a large amount of intangibles from its Mercury Asset Management acquisition earlier this year. I would advise that investors look at the company's assets/equity ratio and disregard its internal capital generation rate statistics, because they overstate Merrill Lynch's leverage and return on capital generation capabilities.

Other than that, it's a pretty straightforward set of financials. Notice how much this company looks like a huge bank, other than in the net interest income statistics. It definitely cannot be thought of as just a brokerage. Here are the numbers on the company, though there are necessarily some blank spots where the data doesn't apply or where Merrill Lynch doesn't have to disclose the information because it is not a regulated bank.

(Financial numbers in millions)

Price/Valuation

Share Price.....$92 1/8
Market Cap.....$36,011.66
Price/Book.....4.20
Price/Tangible Book.....11.38
BVPS.....$21.94
Price/Assets.....10.19%
Price/Tangible Assets.....10.35%
Price/Revenues.....2.23

P/E.....18.75
Amortization-Adjusted P/E.....17.77
Discount/Premium to Group.....-2.7%
EPS.....$4.91
Cash EPS.....$5.18
Diluted Sharecount.....390.90
1998 EPS Estimate.....$4.81
1999 EPS Estimate.....$5.14
Multiple on 1998 Est......19.15
Multiple on 1999 Est......17.92
Amort-Adjusted Multiple on 1999.....17.03
Discount/Premium to Group.....20.2%

Capital Productivity/Efficiency

Asset Turnover2.....5.48%
Asset Turnover.....5.38%
ROE2.....26.88%
ROE.....25.48%
Amortization Adjusted ROE.....96.27%
ROA.....0.67%
ROA2.....0.687%
Net margin2.....12.54%
Net Margin.....11.89%
Efficiency Ratio.....81.48%
Interest Income/AEA.....6.44%
Interest Expense/AEA.....5.77%
Net Interest Margin.....0.68%
Net Share Buybacks (Including preferred).....-$74.0
Dividends on Common.....$207.0
Retention Rate.....89.78%
Payout Ratio on AAEarnings.....10.22%
Internal Capital Generation Rate.....86.43%
Owners' Yield.....0.37%

Balance Sheet

Cash & Nonearning Assets.....$25,051.0
Cash & Nonearning Last Year.....$15,486.0
Long Term Debt.....$49,334.0
Shareholder's Equity.....$8,576.0
Last Year Equity.....$6,500.0
Tangible Equity.....$3,164.0
Last Year Tangible Equity.....$1,045.0
Tangible Assets.....$348,012.0
Last Year Tangible Assets.....$242,148.00
Total Assets.....$353,424.0
Last Year Assets.....$247,603.0
Total Liabilities.....$343,046.0
Goodwill.....$5,412.0
Last Year's Goodwill.....$5,455.0

Leverage

Equity/Tangible Assets.....2.46%
Average Equity/Average Assets.....2.51%
Average Equity/Average Assets (Tangible).....0.71%
Assets/Equity.....39.87
Avg. Assets/Avg. Equity (Tangible).....140.21
LT Debt/Equity.....575.26%

Income Statement

Revenues.....$16,160.00
Interest Income (TTM).....$17,711.0
Interest Expense (TTM).....$17,016.0
Net Interest Income.....$695.0
Noninterest Income (TTM).....$15,465.0
Noninterest Expense (TTM).....$13,272.00
Net Income for Common (TTM).....$1,921.00
Amortization Adjusted Earnings.....$2,026.00
Noninterest income/interest income.....87.3%
Noninterest income/revenues.....95.70%
Noninterest income/NII.....2225.18%
Amort. Adjusted Net/Revs......12.54%
Amortization of Goodwill.....$105.00

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TODAY'S NUMBERS

Stock Close Change CPB $56 1/8 - 3/8 INTC $68 9/16 -1 5/8 JNJ $72 13/16 + 3/4
Day Month Year History Drip (0.83%) (0.51%) 0.67% (14.27%) S&P 500 (0.55%) 1.97% 14.62% 16.92% Nasdaq (1.53%) (0.32%) 12.92% 11.26% Last Rec'd Total # Security In At Current 05/29/98 2.269 CPB $54.513 $56.125 05/01/98 9.380 INTC $80.487 $68.563 05/07/98 5.099 JNJ $69.154 $72.813 Last Rec'd Total# Security In At Value Change 05/29/98 2.269 CPB $123.69 $127.35 $3.66 05/01/98 9.380 INTC $754.94 $643.09 ($111.85) 05/07/98 5.099 JNJ $352.62 $371.27 $18.66 Base: $1600.00 Cash: $316.12** Total: $1457.83

The Drip Portfolio has been divided into 68.021 shares with an average purchase price of $23.522 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: 5/22/98: Sent $30 to buy more JNJ.