Private Investor: Vodafone is still dragging down my average

All of us, I guess, look back at our lives from time to time and wonder "what might have been". "Regrets, I've had a few, but then again too few to mention," and all that. Every year I look back at the investments I've made and every year I have the same feeling: "I shouldn't have bought Vodafone".

Only now, when the rest of the market has been staging a spirited reawakening, have Vodafone shares blinked, yawned and gone to have a spot of breakfast before leisurely stirring themselves and adding a few pence to their value.

Perhaps I ought to be celebrating the fact that they are up to a year high of 144p, but it really isn't anything to write home about. As I mentioned a few weeks ago, the market seems to have lost faith in this would-be telecoms national champion, so that even the good news that comes out of the company becomes very heavily discounted.

The irony for me is that one of the main reasons I bought into Vodafone was to try to mirror the market (to make sure I didn't under-perform). That was because it was such a large company with a hefty weighting in all the market indices.

But ever since the technology, media and telecoms (TMT) bubble burst six years ago, Vodafone has been a drag on my portfolio. I don't know why I'm so patient, but I still feel that it will catch up with the rest of the market in due course, just because I don't think sentiment can stay so negative forever.

What a contrast with its old rival, BT Group. Of course, BT hasn't really been a proper competitor in the mobile telecoms market since it sold off its mobile telephony arm, Cellnet, in 2001. That later became 02, in turn swall-owed up by Telefonica.

I remember when BT shares were selling for £15 each. I really do wonder why on earth I didn't sell when they got to such crazy levels in the TMT bubble. They slumped to a low of below 200p, but last week continued their recovery to crest the 300p mark.

I had thought, half seriously, that all that was left of BT was public phone boxes and a vast bureaucracy, but it seems I am wrong. It is set to make some progress in Wi Max, a beefier version of Wi Fi and it still, even after "unbundling", controls a chunk of the phone network; it is thus doing reasonably well out of the broadband phenomenon.

All BT now needs to do is reverse its strategic error and re-enter the mobile sector, which should be possible when the Government sells off another tranche of spectrum soon. To do that, however, it will probably have to wait for the retirement of Sir Christopher Bland as chairman, as he was so instrumental getting rid of Cellnet.

Pride comes before a recovery it would seem, and even after their recent surge the shares ought to be a buy. I ought to have switched from Vodafone into BT, but I wasn't really paying attention. Too late now, I fear.

How sweet, though, is the smell of success. Tate & Lyle has been a late star performer for the portfolio this year and the great old company has unexpectedly come into vogue. It has had a helpful US court judgment protecting its patent on artificial sweeteners, and I still think that it ought to be able to cash in on the biofuel market when that really begins to take off.

In any case, market sentiment is definitely going Tate & Lyle's way. Surprisingly, perhaps, Tate & Lyle isn't yet the subject of a takeover. Large as it is (a FTSE 100 constituent) I would have thought its excellent mix of businesses would be a tempting target for an American group.

Maybe the dollar is too weak, but I reckon the rise in the share price recently has been so dramatic that it can't be put down purely to the company's trading performance. Much the same goes for another star portfolio performer, International Power.

Where will we be next year? I suspect that the economic climate will be that little bit cooler, with the dollar's decline and higher interest rates around the world making life trickier for all of us. If we are really unlucky then the Chinese economy will stumble, and push the world's governments towards redressing those famous "imbalances" that have developed over the past few years.

No economy, no company and no household will be immune. But if my experience is anything to go by, the best protection is to be found in medium to large well-run companies that have delivered consistently good performance.

That is why I've always been very happy to have shares in the likes of Savills, AG Barr and Greene King. My only worry is that they too will be the subject of unwanted attention from foreign groups or private equity. There was far too much of that in 2006.

s.ogrady@independent.co.uk