Still Simmering
...on the soup issue
by Jeff Fischer (JeffF@fool.com)


Alexandria, VA (August 11, 1998) --Sharply lower stocks are beckoning to dividend reinvestment Fools, "Buy me, buy me." And the investors indeed will -- a million of them firing off checks during the month to buy more Coca-Cola, Pfizer, and Johnson & Johnson.

There is no guarantee (ever) that prices won't go lower, but when they do, these investors are buying more stock anyway. For the most part, with several years of saving and investing remaining, many Fools like to see the stocks of leading companies decline thanks solely to the market. Coca-Cola's business didn't weaken over night -- but the stock price did. That's an excellent arrangement for net buyers.

After a record three-year advance in stock prices, beginning to DRP invest makes a great deal of sense for new (and more seasoned!) investors. Rather than leaping whole hog into the market, DRPs are a way to slowly get your feet wet (and then build) through stock investing; and for those who already own stock investments, DRPs are an excellent way to complement current holdings.

Many Fools own companies like Exxon, Coca-Cola, and Johnson & Johnson in DRPs, and then own companies like America Online, Microsoft, and Starbucks alongside small-caps in a discount brokerage account. The Hall of Portfolios on the Fool (with the Fool Port, Cash-King, and Boring Portfolio) always holds several investment ideas. A mixed investment style makes one sweat less when the market declines (because sure, your brokerage holdings might be lower this month, but at least you're adding to your DRP holdings at lower prices).

Anyway, this is why the Drip Port doesn't fret (and even invites) market declines.

That topic aside, Campbell Soup (NYSE: CPB) is again the issue of the day. The company has initiated fees in its DRP and yesterday we asked what you're doing about it, and what you believed the Drip Port should do. We received well over 120 responses on our AOL and Web Drip message boards.

I enjoyed reading all of the posts and gaining different perspectives. In fact, I copied several thoughts from many of you to share here tonight, but unfortunately we had a network glitch this late afternoon and I lost everything (including this original column) that I had culled from the message boards to share. Everyone's thoughts are still out there on the boards, of course, so if you haven't yet read them here are links: on AOL and on the Web.

There are primarily two schools of thought on the situation:

1) Keep Campbell but don't invest any more in it. Don't incur the selling fees so soon after incurring buying fees. The very gospel of the Fool, one poster reminded, is to buy and hold and minimize transaction costs. The business of Campbell hasn't changed. The DRP has. So perhaps we should use the DRP differently, but not eliminate the funds that we've already invested in the company until the business changes. People arguing this point usually call for investing $100 this month before fees begin. They also want to confront the company over the years as well as (adding peoples' ideas together now) mark Campbell in the Drip Port's daily numbers as "Frozen," or "Not Currently Investing."

2) The other primary school of action is "dump it and don't look back. Get the money out and invest it in something else." (By the way, thought number 1 calls for investing in another food and beverage company, too.)

It took nearly three months to decide to buy Campbell Soup, so realistically it takes time for the Drip Port to decide what to do with it now. Meanwhile, Fools are of course determining what to do in their own accounts. Personally, I would probably take a few weeks to think about this in a regular situation, but this being a public portfolio, I'll aim to have a decision by tomorrow. I need another night to weigh the options and read your posts as they roll in. (Indeed, many Drip Fools might not have visited us on Monday and are just reading about this now.) By tomorrow, I aim to have a good argument to support whatever action the Drip Port takes.

For readers who would like to share an opinion on Campbell and didn't read yesterday's column, here's that column. The three main Campbell options that we presented in it are also copied at the end of today's column. If you've already read yesterday's column and posted your thoughts on the Drip companies message board, perhaps tonight you'd like to read the Boring Port column that begins by discussing the "Asian crisis." Boring provides a Foolish take on the situation.

Fool on!

Addendum

Below are some options for Campbell from yesterday's column, as well as links to the message board to share your thoughts.

1. The Drip Port can sell its $200 worth of Campbell Soup before the new plan is installed (meaning this month), pay the old current fee of $10, and roll the money into a new food and beverage investment. Unfortunately, with the portfolio being so young and small, even this minimal selling cost is significant to us. Also, we'd be selling at a loss no matter what, due in part to the commission. It hurts to sell a company as strong as Campbell Soup at a loss.

2. The Drip Port could keep its position in Campbell and invest very irregularly, sending money when the stock seems low and when we've saved a larger amount to invest. In conjunction with this, we would begin a DRIP with a new food and beverage company as well, and that would take over as our more regular investment in this industry.

One argument for continuing to invest in Campbell is that the business we're investing in hasn't changed. But, then again, I would argue that the investment scenario indeed actually has changed. In the past we didn't experience a 5% loss whenever we invested in Campbell. Now we will -- 5% or at least 2.5% in most cases. Investing is about achieving a maximum return while investing in a way that you understand and enjoy. These fees certainly detract from the possibility of a maximum return, and from the chance to enjoy the process all that much.

A third option...

3. The Drip Port could keep its Campbell shares but not buy any more once the fees kick in. That's right. We could sit on these shares for 19 years. After our most recent $60 investment is added, we'll have $220 invested in Campbell Soup. We could send a large amount this month ($100 or perhaps even more) and take advantage of the final free investment date, and then we could sit on the stock and spend time over the years asking Campbell to reconsider the fees.

Those are just three choices. Maybe you have a better idea. Please post your opinion on the Drip companies message board on AOL and/or on the Web. After reaching a conclusion on this "dilemma" we'll continue with our regularly scheduled program.

--Jeff Fischer

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


8/11 Close

Stock Close Change CPB $50 3/8 - 7/16 INTC $84 9/16 -2 1/16 JNJ $74 - 3/8
Day Month Year History Drip (1.22%) (1.58%) 10.59% (5.82%) S&P 500 (1.31%) (4.61%) 10.16% 12.37% Nasdaq (2.53%) (4.26%) 14.16% 12.48% Last Rec'd Total # Security In At Current 06/30/98 3.017 CPB $54.259 $50.500 07/01/98 9.724 INTC $80.239 $84.563 07/07/98 6.010 JNJ $69.708 $74.000 Last Rec'd Total # Security In At Value Change 06/30/98 3.017 CPB $163.70 $152.36 ($11.34) 07/01/98 9.724 INTC $780.21 $822.25 $42.04 07/07/98 6.010 JNJ $418.95 $444.74 $25.80 Base: $1800.00 Cash: $386.05** Total: $1805.40

The Drip Portfolio has been divided into 76.682 shares with an average purchase price of $23.474 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:
7/22/98: Sent $60 to buy more CPB, and $40 to buy more JNJ.