- The Washington Times - Monday, September 29, 2008


The world’s largest cellular-phone service provider by sales has enormous size and outreach. It has either majority or joint control of wireless service in 18 nations and a minority interest or partnership in many others.

It is, however, suffering the effects of weak economic conditions, especially in the previously resilient markets of Spain and the United Kingdom. Its recent announcement of reduced revenue expectations for this fiscal year - ending in March and in which it cited additional disappointments in Turkey, Romania and Egypt - took a toll on its stock.

Vodafone (VOD) shares are down 36 percent this year after a gain of 34 percent last year. The company recently launched a $2 billion share-buyback program.

Besides enabling those buybacks, the firm’s strong cash flow helps it to move aggressively to expand the scope of its operations.

For example, Vodafone recently spent $11.4 billion to buy a majority stake in Hutchison Essar, the third-largest mobile network in India; $900 million to acquire 70 percent of Ghana Telecom Co.; and an undisclosed sum to buy a major stake in the Australian cell-phone retailer Crazy John’s. Vodafone said it will add 50 stores in the United Kingdom, its home country, as well.

The consensus rating among Wall Street analysts on Vodafone stock is “buy,” according to Thomson Financial, consisting of two “strong buys,” one “buy” and one “hold.”

Vodafone owns a 45 percent stake in Verizon Wireless. One problem, however, is that Verizon uses CDMA technology, while most Vodafone operations use GSM. The incompatibility of those technologies is a stumbling block to smoothly connecting its worldwide network.

It also faces fierce competition around the globe, and it pulled out of the Japanese and Swedish markets because of weak sales there. It must also cope with separate government mandates in each country on what cellular-service fees are allowable.

Management is solid. Vittorio Colao, previously chief executive of Europe for Vodafone, recently became Vodafone CEO when his predecessor retired. John Bond became chairman two years ago after a successful career at the HSBC global bank.

Earnings are expected to increase 11 percent in this fiscal year and 7 percent the next fiscal year. The five-year annualized return is projected to be 9 percent.

Experienced lead manager John Osterweis, who has run the fund since its 1993 inception and has directed private accounts since the 1980s, has surrounded himself with quality staff.

Emphasizing cash flow and growth prospects, the fund buys an eclectic portfolio distributed among stocks of many different sizes. Mr. Osterweis also has more than $1 million of his own money invested in the fund.

The $356 million Osterweis Fund (OSTFX) is down 12 percent over the past 12 months to rank in the top one-third of mid-cap growth and value funds. Its three-year annualized return of 2 percent places it near the midpoint of its peers.

“While it is difficult to find a perfect peer group to compare it with, over the long term this fund has done very well versus the Standard & Poor’s 500 and total stock market indexes,” said Dan Culloton, analyst with Morningstar Inc. in Chicago. “It is a little on the expensive side, but as it grows, it will get cheaper because it will pass some economies of scale on to its shareholders.”

Its annual expense ratio is 1.18 percent.

Its reputation has been built largely on good stock-picking ability. The fund typically buys out-of-favor stocks and holds them for a long period. That means it can appear to be out of step with the market at times. It also holds large amounts of cash if managers do not see an adequate number of opportunities in stocks.

Energy recently represented more than one-fifth of the fund’s assets, with other concentrations in health care and consumer goods. Top stock holdings are Forest Oil Corp., Crown Holdings Inc., VeriSign Inc., Johnson & Johnson, Nestle SA, Visa Inc., El Paso Corp., Trian Acquisition I Corp., Websense Inc. and Medtronic Inc.

This “no-load” (no sales charge) fund requires a $5,000 minimum initial investment.

You can deduct the cost of subscriptions to relevant investment-related publications as a miscellaneous itemized deduction.

“But if you don’t have investments, and you’re reading those magazines for pleasure, you can’t deduct the subscriptions,” said Benjamin Tobias, a certified public accountant and certified financial planner with Tobias Financial Advisors in Plantation, Fla.

You can also deduct advisory fees that you pay financial professionals for advice, Mr. Tobias said. But you can’t deduct trading commissions or costs related to any tax-exempt securities.

Your miscellaneous itemized deductions may also include the costs of tax preparation, safe-deposit boxes, software used to manage investments, transportation to your adviser’s office, unreimbursed business expenses or costs to replace lost stock certificates.

Just keep in mind that your miscellaneous itemized deductions are limited to the amount of expenses over 2 percent of your adjusted gross income. That hurdle is why most taxpayers don’t take those subscriptions as deductions.

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