The Private Investor: 'To find the positive, you just have to eliminate negatives'

So, farewell then Chris Gent. I'm not E J Thribb so I won't attempt to finish the thought in poetic style, but I think those of us who are Vodafone shareholders will miss the old fat cat. I'm still not quite convinced that any human deserves a bonus of £10m for anything, except maybe finding a cure for cancer or removing My Family from the BBC's schedules.

At the time he was paid it, a mere three years ago, there were lots of shareholders who thought it a perfectly reasonable sum for the completion of the huge and historic purchase of Mannesmann. That was at the time when Sir Christopher's Vodafone was in the full flush of its globalising strategy, and to secure a German concern of that size and importance was universally judged to be a considerable achievement.

We all know what has happened to the valuation of telecoms businesses since. Vodafone's share price has declined from a peak of 400p to 125p, having hit 78p last autumn. Viewed from today, the deal looks a little extravagant and so does Sir Christopher's bonus. But how were we shareholders to see that in advance?

Maybe, on a 10- to 15-year view, his deals will yield the return they once promised, and the valuations attached to those purchases will look justified. Nothing wrong with taking a long-term view, but I wonder where Sir Chris will be by then. There are rumours he may go into Conservative politics. At least he'd be able to make a healthy donation to party funds.

Which brings me to the Kuala Lumpur question. I came across an explanation of this intriguing concept in the WPP annual report, which, oddly for an advertising and PR outfit seems to go easy on the spin and appears upfront about its "challenges". Or maybe that's what they want me to think. These hidden persuaders are awfully clever, after all. So clever that they can explain the Kuala Lumpur question far more eloquently than I. Thus:

"Let us say you have in front of you 150 written applications for a single job vacancy and that you must reduce that number to 10 and from that 10 choose one. You may start by believing that you will scan through those applications and select only the most promising; that you will search for the positive. But quickly, if you're at all self-aware, you'll notice that a subtle change has come over your assessment process. You begin to look for errors and omissions. Rather than looking for reasons for inclusion, your eyes will begin to scan for evidence to justify rejection. You find yourself longing to alight on the small false fact, the typographical error, the relatively unimpressive qualification."

So it is with the "beauty parades" that advertising agencies and brand consultants have to undergo, where a frustrated client looks for that tiny negative factor to make his choice, a question that the agency is quite unprepared for. That is when, halfway through the fifth successful presentation, they are asked by the potential client: "Tell me, do you have an office in Kuala Lumpur?"

This process of selection is inevitable in any competitive situation where there are more high-quality applicants than opportunities. So it is, also, in so many markets from cars to supermarkets. In an age when there is such severe downward pressure on prices, margins and profitability, the only rational decision an investor can make, if he wants to take the risk of equities, is to identify those relatively few strong brands where the Kuala Lumpur question isn't asked.

Vodafone fits that quite well, although we'll have to see if Sir Christopher's replacement, Arun Sarin, is able to live up to the ambitious goals of earnings and dividend growth (10 per cent per annum) he has inherited. But when it comes to brand strength surely we should consider capitalising on the US dollar's weakness and getting into some of those strong global brands that should be able to weather even the worst storms.

Coca-Cola springs to mind. Especially when there are encouraging signs that confidence is returning to the markets, with the war on Iraq settled (if not its legality) and Sars almost forgotten.

Next year we have the prospect of some useful quadrennial boosters to the world economy in the form of the American elections, the Athens Olympics, and the European football championships in Portugal. Better viewing than My Family, anyhow.

s.ogrady@independent.co.uk