The latest culture as recommended by our staff

Michael Henderson

Michael Henderson suggests


Sorry to Disagree

Thursday, 24th July 2008

Your email address:   
Friend's email address:   
   

If Vodafone wanted to prove a point with its decision to spend £1bn buying back its own shares, it failed. The value of share buybacks is highly debatable at the best of times and while Vodafone shares are trading at low levels that doesn't necessarily make them cheap. It felt a little churlish for the company to announce the move the day after £11bn had been knocked off its market value after surprising the market with the extent of its poor trading in Spain.

Vodafone is placing a £1bn bet against the market and, in a bear market just getting going, that's quite a brave call. Any more bad news from its mature markets, where consumers are cutting back spending left, right and centre, will hit its shares hard again.

I sympathise with Vodafone's view that the market is undervaluing its shares and they are therefore a bargain. But I'm a firm believer that the role of management is to invest valuable cash in enhancing a company's operational performance (and even Vodafone has room for improvement) not to play the role of investment manager.

Er, no. The role of management is absolutely to be an investment manager. If they see no projects within the company which they can invest in which will generate a higher return than the cost of capital then they should indeed return that capital to investors.

That's what managers are hired for by the shareholders in the first place.

   Previous Back to Trading Floor   Next 

Blogs: Americano | Coffee House | Clive Davis | Melanie Phillips | Stephen Pollard

Actions: Print this article   |   Email to a friend   |   Permalink   |   Comment

Post this entry to:   del.icio.us | Digg | Newsvine | NowPublic | Reddit

Comments

Post a comment


Your comment:*

Your name:*

Your email address:*
(We won't publish this)

*Required information

Please click the button only once - your comment will not be published immediately

The Spectator Parliamentarian Awards
Weekly update

A new job for the IMF: as global policeman

Elliot Wilson 26/11/2008

Carbon footprints

Elisabeth Jeffries 26/11/2008

General Motors must be allowed to crash

Matthew Lynn 26/11/2008

‘These clouds will have a silver lining’

Judi Bevan 19/11/2008
Spectator recommends

Nissan Family Cars - Book a Test Drive Online

Take advantage of unbeatable Nissan value. Book a test drive today.


Spectator classifieds

ROME CENTRE

PORTA METRONIA, ROME Standing high on the top of one of the seven hills of Rome- the Coelian- this unique

City Breaks. ROME and PARIS

ROME and PARIS: over 350 holiday rentals apartments listed: visit  www.romanreference.com  and  www.parisreference.com or call +39 0648 903612.

Jewellery. RUFFS (Estd. 1904).

Goldsmiths by Design Welcome to Ruffs!  You have found a company of Goldsmiths that specialises in the manufacture, amongst other