<THE DRIP PORTFOLIO>
Intel, J&J, Mellon
by Jeff Fischer (TMFJeff)
AALEXANDRIA, VA (July 16, 1999) -- Food, food, glorious food. We will soon provide fresh consideration of the industry. Our food and drink study list as of June 18, as provided by Brian, is:
Company Forward P/E Coca-Cola (KO) 46 PepsiCo (PEP) 31 Wm. Wrigley Jr. (WWY) 30 Hershey Foods (HSY) 23 International Flavors & Fragrances (IFF) 23 Brown-Forman (BF.A) 19 H.J. Heinz (HNZ) 18 Philip Morris (MO) 13Before we indulge our appetite for food, however, we have quarterly earnings to digest. This week, Intel (Nasdaq: INTC) announced quarter two results and predicted a sweeping end to 1999 that was strong enough to boost the stock. We covered the earnings report on Tuesday, and the conference call on Wednesday.
To end the week, our tireless, happy Intel clan announced that -- working with Cisco Systems (Nasdaq: CSCO) -- it will sell high-speed, always-on DSL modems later this year.
Intel is at the forefront in pushing for widespread acceptance of high-speed access because broadband access requires more powerful processors. Intel is also investing increasing amounts of money in new, leading companies and technologies (focused online), and it owns stakes in over 200 young technology-based operations. eToys (Nasdaq: ETYS) is one high-profile Intel investment; Intel also owns 5% of Red Hat, which should come public the week of August 9 with ticker symbol RHAT. Given Intel's relationship with Microsoft (Nasdaq: MSFT), the RHAT investment has a little added spice.
At $67, Intel is priced at over 28 times 1999 earning estimates and 24 times the year 2000 earnings guess.
Tuesday morning of next week, Johnson & Johnson (NYSE: JNJ) will announce second quarter earnings. Net income of $0.82 per share is anticipated, while J&J's pharmaceutical division should once again be leading the charge. Anti-psychotic drugs are selling quite well, Brian reports. He would know.
J&J's stock has risen 15% this year, easily topping the 3.9% gain achieved by Standard & Poor's Health Care Diversified Index. Many pharmaceutical leaders have declined or been flat since January. At $96, J&J trades at 32 times 1999 estimates and 28 times year 2000 guesstimates.
Mellon Bank (NYSE: MEL) should also announce results next week, on July 22. Earnings of $0.45 per share are sought. Mellon's $36 stock is valued at 20 times '99 estimates and 17.9 times year 2000 figures, while yielding 2.20% and with earnings per share growing over 12% annually.
Be sure to check out this Mellon press release if you haven't already. Dale sent it along. Mellon subsidiary, Buck Consultants, is working with Healtheon (Nasdaq: HLTH) and Cisco Systems.
Rounding out the week, on Monday George discussed risk, return, and beta, adding further insight to the interesting topic. On Thursday, Gillette (NYSE: G) was glanced at to see if it made the cut.
We hope to see you on the message boards if you have anything to share or ask. We also hope to see you next week as more earnings roll from our companies front doors to pile up at our feet. Have a great weekend. Be Foolish!
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