What's Next?
Drip Port has a long list & time enough
by Jeff Fischer (JeffF@fool.com)


ALEXANDRIA, VA (Sept. 18, 1998) --This week we concluded a six month study of banking and financial stocks that ended in a buy announcement. The buy, Mellon Bank (NYSE: MEL), is probably not one of the "big names" that you might have expected the portfolio to buy. Dale's comprehensive column on Mellon, which ran Monday, gives a great lowdown on the company and why it -- of all the choices -- is the one.

Tuesday's column pointed to a Washington Post article on the story of a single share of Ford stock, and Wednesday we officially announced the Mellon buy and provided a collection of past articles (the usual "buy report") to support it. On Thursday, we discussed some of the ways to join Mellon's dividend reinvestment plan and offered links to information on DRPs in general. There are a few options to begin with Mellon: a direct purchase plan that requires a $500 initial investment, or by opening a traditional DRP that requires owning one share.

The natural question now is, what's next? The answer is many-sided. We can't get consumed looking for more and more stocks at the expense of knowing our current holdings well. I feel we've kept to date with Intel and Campbell, and to a lesser extent Johnson & Johnson, but we could always do better. Two of our companies will be announcing earnings next month and we'll take time out to cover that.

We're also not going to exactly rush to another buy because that adds costs -- friction costs. It will cost us $20 in fees to buy Mellon. That's a significant amount for a small portfolio. Plus, we already hold stocks that we like to invest in, and we have years to find others. The Drip Port likely won't own more than eight companies in its history (how we'll classify Campell is a question going forward, but it's probably a "static holding"), so, as always, we'll be very careful in what we choose to buy.

Because we won't frequently add money to Campbell Soup (NYSE: CPB), I'd like to find another food and beverage company for the portfolio. There isn't a rush to do that, however, because 21% of the portfolio already consists of a food leader represented by Campbell. The industry that we'll cover next, instead, is the one that you, all readers, vote for us to cover. (So maybe it will be food and beverages, if you wish.)

We had discussed options, but we decided that it was best if you told us what you'd like us (as it is a group effort involving everyone) to study next. The most votes for a specific industry will determine what we cover. We'll formally introduce this voting "contest" a week from next.

Next week, Vince Hanks (TMFElwood) will be gracing us with Foolish Drip columns, one about custodian accounts and DRPs for kids, and another about the types of companies a Fool should look for when beginning a DRP, among other topics. Next week we also have housekeeping to take care of:

  1. Send money to invest in Mellon.
  2. Cancel dividend reinvestment option with Campbell.
  3. Decide where to send our $100 September investment.

Beyond that, a Fool by the first name of Lisa is actively gathering information on how shareholders can meet the filing requirement for having an issue placed on the agenda of a Campbell Soup shareholders meeting. She's Foolishly keeping me appraised of the situation, and we'll see what we can do about Campbell's fees. At the very least, our voice will be heard one way or another. And it's already being heard by us being silent -- suddenly, our monthly investments are stopping.

I can understand a company wanting to spread some of its costs to those who benefit from a program, but I don't understand a substantial fee for dividend reinvestments in a dividend reinvestment program. It's brutal. Perhaps I could stomach the optional cash purchase fee with Campbell (and just invest only once or twice a year), but the dividend reinvestment fee -- nope.

Other than its DRP, Campbell Soup is doing everything right. It has been the most progressive food and beverage related company that I've seen all year -- raising its margins the most, committing to high share buybacks, and reconfiguring its product portfolio while also attacking bold new markets and initiatives. It's fun to watch.

This week, Campbell announced that it will open free-standing retail units to sell its soup in shopping malls, fast-food chains, and airports. The company will also sell Pepperidge Farm products through at least some of these locations. Another point of sale, another opportunity to sell, another means of distribution -- this is largely what food and beverage sales are about, alongside a strong brand name. Campbell is also selling its V8 beverage product more aggressively, in new channels, and has formed a beverage unit at the company to focus on the worldwide opportunities.

The company said of the new fast-food, airport news: "The move is part of an aggressive global branding campaign to boost demand for Campbell's Soup by focusing on direct retail sales to consumers in addition to the more traditional wholesale business in grocery stores and cafeterias."

Having sold Godiva through wholly-owned retail stores, the company is familiar with the direct retail business. Already, the more that I go outside and wander the country, the more I see Campbell and its products in out-of-the-way places. And that's good.

Saturday's Fool Radio Show will cover DRP investing. Check out Tom and Dave on the air in several cities across the country this Saturday. Click here for more information on the shows.

Be Foolish! See you next week.

[To discuss the Drip Port or Drip Investing with other Fools, please visit the message boards linked in the top right of this page.]

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9/18 Close

Stock Close Change CPB $51 + 3/16 INTC $83 Unch. JNJ $76 3/4 + 1/2
Day Month Year History Drip 0.25% 9.84% 10.17% (6.18%) S&P 500 0.12% 6.53% 5.12% 7.23% Nasdaq 1.06% 10.98% 5.95% 4.39% Last Rec'd Total # Security In At Current 09/02/98 8.027 CPB $52.867 $51.000 07/01/98 9.724 INTC $80.239 $83.000 08/07/98 6.543 JNJ $70.138 $76.750 Last Rec'd Total # Security In At Value Change 09/02/98 8.027 CPB $424.36 $409.38 ($14.98) 07/01/98 9.724 INTC $780.21 $807.05 $26.84 08/07/98 6.543 JNJ $458.92 $502.18 $43.26 Base: $1900.00 Cash: $186.05** Total: $1904.66

The Drip Portfolio has been divided into 81.201 shares with an average purchase price of $23.399 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.

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