The Investment Column: Vodafone's expansion strategy makes it a good bet

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The Independent Online

Our view: Buy

Current price: 168p

It was only a few years ago that Vodafone was a mobile evangelist, intent on selling off its German fixed-line business as it did not fit the bill. By the end of 2005, it was talking about the potential of broadband and convergence, but adopted a softly-softly approach to broadband, based around signing joint venture deals with the likes of BT to keep hold of customers who wanted to source high-speed internet and mobile from the same provider.

Fast-forward to today and Vodafone is a fully fledged consolidator in the broadband sector after splashing out £537m on Tele2's Spanish and Italian fixed-line businesses. Vodafone has picked up nearly 650,000 broadband customers in two high-growth markets, yet it has also gained 2.4 million fixed-line voice customers.

It is a sign of the times that the only concern analysts have is the price, not exposure to fixed-line voice. Although it has only gained a market share of 4 per cent in the two broadband markets, Vodafone has paid a 30 per cent premium to the value of the assets under Tele2's ownership. But the company was accused of overpaying for assets in Turkey and India over the past two years, and it has quickly turned that sentiment on its head.

Under Arun Sarin's leadership Vodafone has become synonymous with investment in high-growth emerging markets. Yet its strategy in mature markets to cut costs and drive growth from new services such broadband is just as important. The Tele2 deal reflects that focus and strengthens the company's hand in two key European markets without materially affecting its financial performance. Despite various threats to the company's progress over the coming years, notably price deflation and regulation, the shares look a good bet to keep progressing toward the 200p level.

YouGov

Our view: Risky buy

Current price: 169p

YouGov has been a pioneer of online polling – usingthe internet rather than traditional face-to-face and telephone means that YouGov is one of the lowest cost and highest marginoperators.

Its full-year results included the kind of numbers Mr Brown or Mr Cameron would give their right arms for. Pre-tax profits rose by 39 per cent to £5.7m on the back of a 51 per cent jump in group turnover to £14.3m.

Despite the name most of its business is commercial and consumer polling, with political polling counting for only 5 per cent of turnover. Overseas expansion has been strong, with acquisitions in Scandinavia, Germany and the United States boosting revenue, and its blue-chip client base including HSBC and Google should continue to produce plenty of new opportunities.

However, this is not a stock for the risk-averse. The shares trade on a forward multiple of over 23 times forecast 2008 earnings, a full rating. But YouGov has plenty of momentum and a strong business model, and with elections on both sides of the Atlantic coming up the outlook remains positive. Buy.

International Greetings

Our view: Hold

Current price: 263.5p

August's trading update from International Greetings sent the stock into freefall, and investors are still nursing their wounds. But despite the tough market conditions in the cards, wrapping and stationery industry the company is carrying on with its acquisition strategy.

Yesterday's 50 per cent investment in the Australian group Artwrap is a bold move, and the deal itself looks sensible. International Greetings will pay an initial £1.63m with a further £0.63m depending on profit over the next 12 months – a decent price considering Artwrap is expected to make £1.3m this year.

However, even though the shares trade on an undemanding 9.4 times forecast 2008 earnings, new investors would be unwise to assume that underlying market conditions have improved dramatically. A good deal, but not good enough to pile in. Hold.

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