NJ Soup Party
...follows the Boston Tea Party?
by Jeff Fischer (JeffF@fool.com)


JUPITER, FL (August 12, 1998) --Think "Boston Tea Party."

Americans rebelled against England's high taxes by dumping tea into the harbor. If they didn't have the tea to dump, though, it wouldn't have been much of an event. More importantly, prior to dumping the tea, the people had been voicing displeasure about taxes. The time had simply come for more action.

Yet, imagine if -- before ever speaking out as a group -- the people simply dumped the first shipment of tea to arrive in Boston in 1773 without giving explanation. Rather than sending a strong message, the act would have only confounded England.

So, why were people so upset? The tax on tea would have cost the average family only pennies per year, but, if they paid it, wouldn't it encourage England to eventually raise taxes? And to tax other items? Could this be only the first step? Sam Adams' famous quote, "The power to tax is the power to destroy!" arose from the situation.

A concise history of the Boston Tea Party conjures up some parallels with Campbell's DRIP and the transfer agents' power to tax the investor (an investor is, after all, little more than a very dedicated consumer, in many cases).

So, what will the Drip Port do about the new "taxes" that it needs to pay to merely be a loyal and consistent investor in Campbell Soup? Well, we simply won't pay them. The opinions on the message board have largely been divided between "Dump the stock" and "Hold it but don't buy again after this month." The reasons for holding are many, and Fools have made the argument clearly on the message board.

We worked for months to reach this buy and the business hasn't changed. We've already incurred the start-up costs and would incur nearly equal selling costs ($10) if we sell, plus a short-term loss. It costs us nothing to continue to hold the stock. You might mention missed opportunity costs, but I still believe that Campbell's business at the current valuation is as good a place to invest as any in its industry (when ignoring the fees). If we hold, though, of course we'll begin a new commission-free DRP with another food and beverage company to invest in regularly. We needn't sell our current holdings in order to do so, though.

On the flipside: If we sell, where does that leave us? We pay commissions to sell and then we forget Campbell and invest in another company? Is it really that simple? What if our new company initiates fees in its DRP months after we begin to invest in it? Then do we sell again and incur yet more costs? We need to invest in businesses, not "free DRPs," or we might be jumping ship many times and end up failing in the end.

My desire for the Drip Port is to hold what we own in Campbell Soup and send a letter (or numerous letters over time) to the entire board of the company, as well as work to get this issue on the agenda of the annual shareholders meeting. People have argued that we shouldn't waste time on the issue, but instead just move to a different and free DRP. That's like arguing that you shouldn't work to better anything, though -- but rather just ignore the bad. That's not Foolish. Whatever work we might accomplish on the Campbell front could be beneficial in other parts of the DRP world. We might indirectly persuade other companies to remain commission free, whether Campbell changes its ways or not.

So, the Drip Port will hold what it owns. What's the next action?

I'm not certain that the Drip Port will even bother to send any money to Campbell this month -- on principle. We might merely stick with the $220 in stock that we own, put a big disclaimer on our daily numbers -- "Frozen Position" -- and go from there. Consider this: If one last tax-free shipment of tea were coming from England, many people would buy as much as they could. But, knowing every shipment afterwards was going to be taxed, just as many people wouldn't buy any more tea at all from England, on principle.

We have over one week to decide what to do this month in regards to buying more Campbell one last time. More time to think is never a bad thing in a Fool's life. (That's also partially why I think selling so quickly would be a mistake. Why rush to sell? We'd only save a $5 commission and we'd be out of our position at a loss and without a box to stand on or any future choices regarding Campbell.)

Overall, some excellent points made on the message board include this one: "Make your last no-fee investment for $100 and let it grow as a salutary example for posterity. We've all heard those stories of 'If ONLY grandpappy had had the foresight to buy a single share of Coca-Cola and hold it forever.' Here is your chance to be a revered grandpappy 50 years hence."

Holding, we'll also need to decide what to do with the dividends. Consider this post regarding the minimal fees we'll incur even if we reinvest them:

"I think we should make one final investment and then sit on what we have. Our three shares are going to pay $2.53 in dividends a year at the current rate. Dividend reinvestment fees will cost us $0.12 - $0.15 per year based on the new fees. At that rate, it would take almost ten years to make up the cost of selling the stock. Besides, I still like CPB as a long-term investment."

Meanwhile, TMF Python made this suggestion, as did many others: "I suggest that you hold onto the shares and let the company know that you want the dividends sent to you. When the dividends are received, roll that money into the money that would be invested, and use it to buy more shares of another company without fees. So instead of investing $100/month, use the dividends from CPB and add it to the $100. Then write the check. Don't forget, keep writing the company about the fees. If they get dropped, you're ready to go!"

Finally, there's this post, # 4690, from MrBookworm on our website's "Drip Companies" messsage board:

Author: MrBookworm

Title: Enrich, Amuse, and Educate

1. Enrich: Selling CPB at a loss now does not Enrich the Fools. Adding to the position at a cost of 5% does not Enrich the Fools. The DRiP should keep CPB, add $100 to it this month while it's free, then stop. Take the dividend check and send it to one of the other companies each quarter. See what it turns into over 20 years.

2. Amuse: Selling CPB now doesn't Amuse anyone. Keeping CPB and actively trying to get the fee structure changed could definitely be Amusing. How about a shareholder proposal to dump the fees or fire the trust company? Think of the fun we'll have sending letters to CPB management pointing out all the money they are wasting in mailing us dividend checks and annual reports.

3. Educate: Selling CPB now doesn't Educate readers that start tuning in next year. Having CPB in the portfolio will be a good reminder to future Fools (and current Fools) that sometimes things like this happen. There is probably quite a bit of education involved in learning how to lobby our company to treat shareholders like owners rather than meal tickets. We also need to educate CPB management to focus on the soup business rather than the overpriced dividend re-investment business.

Selling CPB now doesn't meet the [Foolish] criteria to Enrich, Amuse, nor Educate. Buying more when the fees kick in doesn't make sense either. The answer is to let it collect dust [or hopefully appreciate!] until the fees are waived or until CPB offers to buy back shares from small shareholders (hopefully at a profit to the portfolio).

Well said.

The Drip Port is keeping the Campbell shares that it owns. I was leaning this way from day one when I heard about the possibility of fees, but weighing the options always makes sense. We're still weighing. Whether or not to send money this month and what to do with the dividends will be discussed in time. For now, the big decision to hold our Campbell Soup is made. Now we need to find another food and beverage company to begin investing in regularly, and we're also still wrapping up our search for a financial stock buy. Who ever thought that a humble Drip Port could have so many issues at once? It'll be a busy and fun few weeks. Thanks again for all the thoughts on the message boards. See you out there.

Fool on!

-Jeff Fischer

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


8/12 Close

Stock Close Change CPB $51 3/4 +1 3/8 INTC $85 5/8 +1 1/16 JNJ $75 1/16 +1 1/16
Day Month Year History Drip 1.13% (0.46%) 11.84% (4.76%) S&P 500 1.43% (3.25%) 11.73% 13.97% Nasdaq 1.83% (2.50%) 16.25% 14.54% Last Rec'd Total # Security In At Current 06/30/98 3.017 CPB $54.259 $51.750 07/01/98 9.724 INTC $80.239 $85.625 07/07/98 6.010 JNJ $69.708 $75.063 Last Rec'd Total # Security In At Value Change 06/30/98 3.017 CPB $163.70 $156.13 ($7.57) 07/01/98 9.724 INTC $780.21 $832.58 $52.37 07/07/98 6.010 JNJ $418.95 $451.13 $32.18 Base: $1800.00 Cash: $386.05** Total: $1825.88

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.