Private Investor: Take a deep breath and jump into the takeover scene

Another week, another four- year high for the FTSE 100 index, although it stumbled a bit towards the end of the week. I'm still trying to work out quite why the markets have been perky recently when there's so much gloom around about the "real economy".

It's not the first time that the Stock Exchange and the wider economy have moved in opposite directions, of course. They did much the same thing in the nuclear winter that was the British economy rate of growth you understand, in the long term the prospects for the UK should still be relatively benign, especially when we look over the channel at France and Germany. Isn't it funny how no one but no one is talking about Britain joining the euro any more?

Perhaps the most remarkable aspect of the stock market's bull run is how much merger and acquisition activity there has been. These are times when the benefits of holding shares in a nominee account at a broker can be felt most keenly, as they happily sort out the paperwork associated with such activity.

It makes it just a little easier to bear when, as I have written before, excellent stocks such as Manchester United or Belhaven, to name two disparate examples, find themselves being gobbled up by much bigger predators.

These were companies carefully chosen by your correspondent in the hope and expectation that they would be long-term success stories. Clearly cleverer, richer people than me agreed with that.

Not that I'm ungrateful for the premium that attaches itself to such take over targets, sometimes long before the corporate action actually happens.

So it continues to be with my holding in the telecoms company O2, the eternal takeover target, and to which I added another slug of shares last week.

Talk about O2 being bought by Royal KPN or Telefonica or someone else never seems to die away for long. Even as it posted increases of 1 or 2 per cent a day in its share prices I was readying myself to dive in and buy some more O2, buoyed by the knowledge that even at such record highs my past purchases, made at anything from 48p to 151p would keep my head above water.

The other great thing about O2 and the appreciable rise in its value since the great telecoms slump of a couple of years ago is the way that my accumulation of shares has offset the lacklustre showing of BT.

You see, O2 was spun out of BT in 2001 and the shares formed the foundation for my current, much bigger, holding.

Anyone who held on to or added to their O2 shares would have done quite well, with the shares up now 50 per cent on their notional price when O2 demerged. They way outperformed BT over the same time period.

If only Vodafone were showing anything like the strength of O2 or, indeed, the wider market, remarkable considering its size and the weighting it has in the FTSE 100 Index.

However, the shares just seem stuck at the 150p level.

It seems that no one wants to view Vodafone as a growth stock anymore or even as a proxy for general world economic growth (it is a global enterprise after all).

In fact, Vodafone doesn't even seem to command the dignity that a rather more old fashioned utility might enjoy. Yet there can be few better hedges against a global slowdown, and there are plenty of emerging markets where Vodafone might well find itself benefiting from the leap frog effect, as communities that never had much in the way of land line infrastructure just migrate straight on to mobile technology for their telecoms needs.

I hope, and expect, Vodafone will catch up with its peers. It certainly isn't about to be taken over.

s.o'grady@independent.co.uk