Private Investor: When firms act mean, the share buyers get keen
Saturday 10 December 2005
"Tesco 'riding roughshod' over planning rules, MPs told" ran the headline in The Independent last week. Good news or bad news?
There's a case for a positive interpretation. Any huge concern such as Tesco that still shows an ability to stand its own ground, if you'll pardon the pun, deserves a certain amount of respect.
Instead of thinking: "We're big. Who cares about a few square feet of retail floorspace? Let's keep on the right side of the bureaucrats", Tesco has gone ahead with it s plans for expansion, and obviously attracted some adverse attention as a result. Lots of small shopkeepers, in particular, have been writing to the MPs running an inquiry into the future of the retail sector.
Whatever the merits of the claims and counter-claims against Tesco, "bad" publicity can sometimes help the share price. Some years ago now, when it was still a relative newcomer to the stock market, Stagecoach was accused in a television documentary of deploying some rather aggressive business techniques against its rivals on the buses. As a shareholder, I was terrified of the impact the revelations would have, but rather than being outraged by the allegations, the City took it as a cue to buy the shares.
I have to choose my words carefully here, but something a little analagous might be happening with British Airways. Nothing like sharp practice here, but the new chief executive, Willie Walsh, has, as I wrote last week, made no secret about his determination to take on BA's cost base and make it into an even more efficient operator. That may mean confrontation with the unions, and he seems up to the fight.
I'd rather he could persuade everyone of the need for change without any unpleasantness, but he doesn't seem the squeamish type. So here's a tough man with ambitious ideas, and the frisson of excitement infects the share price, with BA up to 334p mid-week. How I wish I'd bought a few more BA shares when they were trading at about a quid after the 9/11 terror attacks.
The City knows that the pressures on the airlines are only going to increase in this terror-obsessed age. One day, too, there'll be a global agreement that ends the tradition whereby airlines pay no duty on the fuel they use. So BA needs to be in an even stronger position to face those challenges. With Walsh there, there is at least some evidence that BA is going to be able to overcome its difficulties.
Then there's one other component of my portfolio which hasn't had any bad news as such, but which has rather simply not had anything exciting to say about its future. Vodafone, perhaps the greatest British industrial success story of the past two decades, has been hammered and hammered again by the analysts, downgrading it left and right and centre. It has thus woefully underperformed the market. I imagine that if Vodafone had picked up as well as the rest of its peer group, then the Footsie would be safely through the 6,000 barrier.
But the shares seemed for months to be struggling to see 150p and are now nearer to 125p. It's gone ex-growth, they say, and yet it isn't even given the same sort of treatment that a classic utility stock is afforded.
Maybe what Vodafone requires now is some real hard figure to go in there and stir things up. He, or she, may not actually get very far with the cost-cutting or aggressive expansion, but at least the City would like it and it might help us shareholders.
There's no reason why a company such as Vodafone can't be perceived to be entrepreneurial, original and exciting; for some reason it seems to have the same slumbering image as a small British building society or water company. It needs to call for firstname.lastname@example.org
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