Drip
Portfolio Report
Campbell's New Plan
by Jeff Fischer ([email protected])
Alexandria, VA (July 20, 1998) --It's definitely not soup weather. With temperatures across the country hitting record highs, few people are inclined to stoke up the stove, simmer a pot of soup, eat it, and then sweat for two hours. Earnings expectations for Campbell Soup (NYSE: CPB) are always lower in the summer, and 1998 is no exception. But this is par for the course. What we might instead remember Campbell for this summer are the changes in its dividend reinvestment plan.
Reportedly, investors will receive notice of a new Campbell DRP in late July -- meaning, it should arrive any day now. On the Fool's Web message boards, yotommy reported some of the new plan's features in this post. Changes include the ability to purchase shares weekly, to sell shares daily, and to have automatic investments made through your bank account (the minimum investment is $25). Of course, a Fool can still invest the old fashioned way -- through the U.S. mail system, courtesy of inventor Ben Franklin -- but the minimum check investment will be $50. A great new feature of the plan is the ability to drip Campbell shares in an IRA. Only a small handful of dividend reinvestment plans offer an IRA option. However, the new plan will reportedly also have fees for the general buying and selling of shares.
(Boo! Hiss!)
Still, the Drip Port won't consider removing this red and white pot from its stove until we know more details. We've hardly begun to cook with Campbell and it'd be a shame to cool the fire now. We will make a decision, though, after seeing the fee structure for buying shares. If the fees prove reasonable, we might stick with it, possibly sending investments less frequently. Apart from that, the IRA option could make the plan worthwhile for this portfolio, fees or no fees. Investing through an IRA, the Drip Port and Fools in general benefit tax-wise in the long term, perhaps enough to compensate for minimal fees. On top of that, it wouldn't be surprising if Campbell was the only DRP we ever own that offers an in-house IRA, it being so rare (unless trends change), so taking advantage of it might be in order.
Either way, in the meantime we're not altering our plans. This month, the Drip Port is sending its $100 to Campbell Soup and Johnson & Johnson (NYSE: JNJ) and bypassing Intel (Nasdaq: INTC). The port mainly bought some Intel last month because the stock was below $70 when it was time to mail our investment checks. We ended up buying at $73. With Intel above $80 again, we're skipping it this month. The stock trades at 26 times 1998 earnings estimates, and though there is potential for upside surprises this year and next (most likely next), there isn't a rush for this portfolio to buy more shares -- at least not in this Fool's mind right now.
Much more important in this decision than the current valuation of the stock, though, is the size of our position in Intel relative to other holdings. In fact, this is almost the only impetus for skipping Intel. Our investment in the chip giant is still nearly twice as large as our second-largest investment, Johnson & Johnson. As our daily los numeros reveal, the Drip Port has invested $780 in Intel, $419 in J&J, and $163 in The Soup King. This month we'll send $60 more to Campbell Soup and $40 to J&J.
As promised, the Drip Port will implement a regular investment schedule once it has a full portfolio (six to eight holdings, most likely). After all, this type of investing is most consistent and reliable when you don't alter it month to month. It's most Foolish to simply receive the monthly investment statements showing that you -- an investor with great foresight and patience -- have socked away more of your earnings into America's leading companies, dollar cost averaging into new shares with each new month.
The $60 and $40 checks will be mailed tomorrow. The Campbell Soup investment is made at the end of this month, while J&J's is made in the first week of August. Johnson & Johnson stock reached a new 52-week and all-time high today before turning with the market. The equity has risen quickly since reporting earnings that met expectations on strong pharmaceutical sales, as covered here last week. We'll take a close look at all of our companies after our financial services investment is decided upon. Tomorrow, Dale returns to continue narrowing his list, which currently includes Norwest and NationsBank as the two strong contenders.
See you on the Drip message boards (linked in the top right of this page every day). Fool on!
--Jeff Fischer
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