More Future Speak
Plus, online DRPs, industry votes & goals

by Jeff Fischer (tmfjeff@aol.com)

ALEXANDRIA, VA (Oct. 8, 1998) -- During a weak stock market, it's good to be calm, objective and to think ahead while continuing to DRP invest.

In the interest of looking ahead, on Tuesday we discussed the future of DRPs and possible directions that the plans might go. Another emerging concept is the ability to invest small amounts and buy fractional shares of any company, whether it has a DRP or not. This means that you could dollar-cost-average into Cisco Systems, Microsoft and Starbucks... all in small amounts and on a regular basis even though these companies don't pay a dividend and don't have DRPs. How? There's at least one independent company implementing such an all-inclusive service. The only downside to the program is the fees, which aren't insignificant.

Another thought:

At the rate that discount broker fees are declining, soon you might be able to dollar-cost-average into a stock using a traditional discount broker for a very small fee, and more discount brokers are beginning to offer dividend reinvestments for free. One Fool wrote to share that he's moving his Campbell Soup (NYSE: CPB) stock to such a broker to avoid the dividend reinvestment fee charged in the DRP.

For the most part, though, the good old traditional DRPs will probably remain our best friend. And it's not surprising that our favorite DRPs and, by extension, our favorite companies (ones that we invest in regularly and that we patronize whenever we can) are those that take the extra step to help millions of small investors by offering complete, friendly investment programs. These companies include Intel, Coca-Cola, Johnson & Johnson, Pfizer, Exxon... and even Mellon Bank, our financial investment with which I'll probably soon open an online bank account, too. (It's not surprising that good will, or what is perceived to be good will, is usually returned to a company or an individual in many ways.)

Also looking ahead, the Internet is making it easier for public companies to communicate and be open with shareholders, and at the same time it's making it more difficult for poorly run, weak companies to pull the wool over shareholders' eyes. If you run a mediocre company, investors or would-be investors are talking about it on the message boards. Ideally, informed investors will not send capital to poor companies due to knowledge obtained on the Internet. Meanwhile, strong companies will have active, vibrant message boards on the Web, and develop a following of investors that grows, like anything, by momentum.

What I hope for eventually at the Fool is a company representative on nearly every message board. For instance, I'd like the Fool to have an Intel investor relations person monitoring the Intel board once a week, legally posting corrections or statements, and answering answerable questions. Also, let's have a Starbucks employee doing the same on the Starbucks board, and another person "manning" the board for the sometimes too quiet Johnson & Johnson company. The Internet makes it possible for companies to maintain ever-closer relationships with shareholders, and those that do so will stand out (and will likely be the great companies to begin with) and build extra value over the decades, while companies that opt to remain fortressed will lose shareholder interest.

DRPs Online. Speaking of the Internet, on Tuesday we listed several companies that now offer your DRP account information online. I'd like to give details on how to access it. The Web address for these First Chicago DRPs is: http://gateway.fctc.com. (You can't currently obtain the information from the normal www.fctc.com address.) Once at the site, you need a PIN number to access your account, and that number should have been (or will be) sent to you on a recent monthly DRP statement or with a dividend check. For instance, information regarding the online offering of Johnson & Johnson (NYSE: JNJ) was included on the bottom of last month's statement (in my case).

If you want to access your online DRP account but you don't know your PIN number, here's all you need: your stock issue number (which is on your printed account statement), your DRP account number, your social security number, and finally a password. If you don't know your password, you can call 1-877-THEWEB7 for help. (It's a toll free number run by First Chicago.) Once you have this information, skee-daddle over to http://gateway.fctc.com. There you can probably already find the price that DRP investors paid for J&J shares yesterday if you have a J&J account, for example.

A thank you goes to Mr. James Volpe of First Chicago for this information.

Industry Votes. So far, Fools are voting on the message board that our next industry of study be integrated oils, with Exxon, Mobil, and BP most often cited. Also close behind oils are the utility industry, telecommunications, and retailers. Several laps behind, but still garnering many votes, is the entertainment industry. If you haven't voted yet, please post your industry preference on the Drip Companies message board.

Our Goal. The Drip Port wants to build a diversified portfolio (we're already halfway there) and we're still so young that almost any industry that you vote for will fit the bill. That doesn't mean, however, that we'll buy a stock from whatever industry we study. We could study oil companies for three months and decide that we don't understand them well enough, or that the economics of the industry are less than stellar. The goal we have of growing our port to $150,000 in twenty years is aggressive, especially because nearly one-quarter of our money will be invested during the final one-quarter of those years. If the early investment foundation that we're building isn't substantially larger and isn't compounding fifteen years from now, we're in trouble as far as our goal is concerned.

This is one way to say that we can't afford to take undue risks on any industry or company. Often the best allocation of investment dollars is in that with the least risk or uncertainty, but the strongest possibility for sustainable capital appreciation. Too many investors think that the best way to grow wealth is to invest in the most risk and most uncertainty. When you look at legendary investors, though, that hasn't been their style. In fact, it's been closer to the opposite of that.

Tomorrow we'll consider Intel and Johnson & Johnson in preparation for their earnings announcements next week, which are announced on the 14th. Finally, in case you missed it, this week's Dueling Fools is on Campbell Soup.

Fool on!

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


10/08/98 Close

Stock Close Change JNJ 75 3/4 -1 9/16 INTC 78 7/16 - 5/8 CPB 57 1/8 +1
Day Month Year History Drip (0.41%) (1.68%) 10.17% (6.18%) S&P 500 (1.15%) (5.66%) (1.13%) 0.85% Nasdaq (2.97%) (16.22%) (9.63%) (10.96%) Last Rec'd Total # Security In At Current 09/02/98 8.027 CPB $52.867 $57.125 09/01/98 9.727 INTC $80.238 $78.438 09/08/98 6.564 JNJ $70.161 $75.750 Last Rec'd Total # Security In At Value Change 09/02/98 8.027 CPB $424.36 $458.54 $34.18 09/01/98 9.727 INTC $780.50 $762.99 ($17.51) 09/08/98 6.564 JNJ $460.54 $497.22 $36.69 Base: $2000.00 Cash: $286.07** Total: $2004.82

The Drip Portfolio has been divided into 85.474 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.

**Transactions in progress:
9/21/98: Sent $77 to buy/enroll in MEL. 9/30/98: Sent $100 to buy more JNJ.