Touchstone Friday
...and Intel and J&J chime in next week

by Jeff Fischer (tmfjeff@aol.com)

ALEXANDRIA, VA (Oct. 9, 1998) -- Next week Intel and Johnson & Johnson will report third quarter earnings and we're ready to pull the trigger (sell our entire position) if either one misses the estimate by even one penny.

(Kidding.)

Some people do throw their money around with that much fickleness, even though quarterly results and a stock's subsequent price often have little correlation. Instead (thankfully), the longer-term outlook that management provides in the conference call usually wins the logic of investors and drives the stock price. We'll cover the Intel (Nasdaq: INTC) conference call next week and provide a summary. We already know that the company expects a stronger second half of the year, but will that outlook change as international economies continue to falter? We'll see. Perhaps we want Intel stock to fall lower so we could buy more at cheaper prices.

Intel is expected to post earnings of $0.79 per share, down 2% from last year but up 11% from the diluted $0.71 per share achieved last quarter. Net income would be about $1.33 billion and revenue should land around $6 billion. We should also see a significant rise in gross margin, topping 50%.

Johnson & Johnson (NYSE: JNJ) is expected to report earnings per share of $0.70 per share, up 12% from last year. The largest pharmaceutical companies in the United States (and J&J is definitely one of them, with its pharmaceutical division ranking by size in the top five) are growing strongly despite any international situation.

Pharmaceuticals are a defensive industry and as technology and biotechnology continues to improve, new drugs and healthcare solutions are driving sales and earnings growth as aggressively as anytime in the past. The average large pharmaceutical firm could grow earnings per share this quarter an exceptional 21%, as shared in this article. That compares to an expected 2.4% decline in earnings per share at the average S&P 500 company, the first decline since 1991.

This somewhat predictable situation (pharmaceuticals remaining strong even in a weak environment) is why the Drip Port invested in the industry early in its life, and is why the Cash-King Port invested in not one, but two, pharmaceutical leaders.

Our Next Focus. Votes continue to pour in and integrated oils are leading the pack as our next industry of study. We'll tally the votes and share the results next week. If you haven't voted, please do. We'll extend the vote to Monday morning. Simply post the industry that you'd like to study and the companies in it (if you have a preference) on the Drip Companies message board. Please title your post "Next Focus."

We're looking for other Foolish insight from you, too. If you invest in DRPs: What do you like about DRP investing, and what don't you like? I'm looking for real-life examples to share in a Drip booklet. I'd like Foolish quotes from Fools, to be precise, about DRP investing. Do you remember how you felt when you began your first DRP? How do you feel when you fire off your monthly investments? And how do you feel when the stock market declines? If you have any quick thoughts and don't mind them being published in a booklet with your name or screen-name, please Foolishly share them on the message board linked in the paragraph above.

Touchstone Friday. The week was volatile, with the Nasdaq down a whopping 12% as of Thursday. It bounced back some on Friday. The Drip Port held up as Campbell Soup rose over the week and Intel was steady in the end. J&J declined. We didn't discuss our holdings this week, though, or focus on their price movements, of course.

On Monday we asked you to post your preference for our next industry to study, and on Tuesday we discussed current trends and the possible future of DRP investing following a talk with First Chicago Trust Company of New York. Wednesday, Brian shared how you can save your companies money as a responsible shareholder. Finally, on Thursday we discussed other possible investing trends that could develop in the future, as well as explaining how to obtain current online DRP account access for J&J DRP owners.

Have a great weekend! See you next week, when we'll announce our next industry (remember to voice your vote on the message board) and cover earnings announcements.

Fool on!

--Jeff Fischer

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


10/09/98 Close

Stock Close Change JNJ 76 + 3/16 INTC 83 13/16 +5 3/8 CPB 56 1/2 - 5/8
Day Month Year History Drip 2.44% 0.72% 12.86% (3.89%) S&P 500 2.59% (3.21%) 1.43% 3.47% Nasdaq 5.17% (11.89%) (4.96%) (6.36%) Last Rec'd Total # Security In At Current 09/02/98 8.027 CPB $52.867 $56.500 09/01/98 9.727 INTC $80.238 $83.813 09/08/98 6.564 JNJ $70.161 $76.000 Last Rec'd Total # Security In At Value Change 09/02/98 8.027 CPB $424.36 $453.53 $29.17 09/01/98 9.727 INTC $780.50 $815.27 $34.77 09/08/98 6.564 JNJ $460.54 $498.86 $38.33 Base: $2000.00 Cash: $286.07** Total: $2053.73

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.