Touchstone Friday
Plus, next investments & Foolish portfolios

by Jeff Fischer (TMFJeff)

ALEXANDRIA, VA (Oct. 23, 1998) -- This week we covered and learned a good deal.

On Monday, Intel (Nasdaq: INTC) announced that it planned to acquire Shiva (Nasdaq: SHVA). We wrote about it.

On Tuesday, Mellon Bank (NYSE: MEL) announced earnings. We wrote about that. We also learned from Temper of the Times (a division of Moneypaper) that our first share of Mellon was bought at $48 and change. The buy will be entered in the Drip Port numbers next week, along with the fee.

Because we want to learn more about Johnson & Johnson (NYSE: JNJ) before moving forward, on Wednesday we discussed many of the positives about the company's pharmaceutical division.

Because we don't want to invest with our eyes closed to negatives, on Thursday Brian began to dicuss the weaknesses at J&J. He's preparing to smother my Bull argument in our coming Dueling Fools feature on the company. Not even J&J's new margarine spread will stop him.

Next Investments. This weekend we'll send our $100 to invest for November. Our two stocks don't look amazingly cheap, but have they ever? (Okay, JNJ looked fairly inexpensive when we began to buy it, and actually now Intel looks.... we'll, let's see!)

At $87, Intel trades at 22.6 times the 1999 earning estimate of $3.84 per share. The stock used to trade at 26 times 1999 estimates, or higher, but it's now closer to a 22 multiple. Not bad. How did this happen? Estimates have been raised. Long ago, in the heat of summer, we talked about the potential for an upside surprise in 1999. Fourteen analysts raised their estimates for next year during the past two weeks.

Intel is expected to grow earnings an average of 20% annually the next five years. That's heady growth in a PC market growing near 14%. Intel's new estimate for next year calls for 19% growth following a weak 1998.

Johnson & Johnson trades at 27.6 times the 1999 estimate of $3.02 per share. That estimate represents a 12% gain over 1998 numbers. I might now argue that there's room for some upside surprise at JNJ (in sales-growth at least) next year. We'll see if this argument forms or doesn't when I write the Duel on the company.

The Drip Port has invested $560 in JNJ and $780 in INTC, even though we haven't bought more Intel since July because we've been working to balance the portfolio. So far, this strategy has worked well. We'll continue with it for logistic reasons, but this month some money is going to Intel, too -- so they don't forget we're here. We'll send $60 to JNJ and $40 to Intel. (Hopefully both stocks will be lower in the weeks ahead when we buy!) Intel is bought on the first trading day of November, JNJ will be bought around November 7.

Next week: Get ready to compile a list of the companies that we're investigating next!

To close, did you know that the Motley Fool now offers portfolio tracking on the Web? Enter your portfolio and have one convenient (and Foolish!) place to obtain your quotes and track your investments against the S&P. The area also offers handy links to the message boards, earning estimates, news, company snapshots, and more. Plus, importantly, where else do stock quotes arrive with a graphic smiley face or a frown? Not to mention the beloved neutral "flat face" that appears when your stocks are unchanged.

Have a great weekend!

--Jeff Fischer

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

10/23/98 Close

Stock Close Change CPB 56 1/4 + 1/4 INTC 87 1/4 - 1/8 JNJ 83 3/4 + 5/8
Day Month Year History Drip 0.27% 5.14% 17.80% 0.32% S&P 500 (0.72%) 5.28% 10.33% 12.54% Nasdaq (0.52%) 0.00% 7.87% 6.28% Last Rec'd Total # Security In At Current 09/02/98 8.027 CPB $52.867 $56.250 09/01/98 9.727 INTC $80.238 $87.250 10/07/98 7.850 JNJ $71.405 $83.750 Last Rec'd Total # Security In At Value Change 09/02/98 8.027 CPB $424.36 $451.52 $27.16 09/01/98 9.727 INTC $780.50 $848.71 $68.21 10/07/98 7.850 JNJ $560.53 $657.44 $96.91 Base: $2000.00 Cash: $186.08** Total: $2143.75

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.