Whatever Vodafone Group (VOD ) decides to do with its 45% stake in Verizon Wireless, some see the world's largest mobile carrier as a great bargain at 22. "We like Vodafone whether or not Verizon buys Vodafone's 45% stake in Verizon Wireless," says Gary Stroik of Wealth Builders, an investment firm. Speaking of Vodafone's American depositary receipts (ADRs), he says: "We bought in at 21, and it pays a 3.4% dividend yield." Not a bad place to be while waiting for a decision on the Verizon sale, worth an estimated $40 billion, says Stroik. Verizon has said it wants to buy Vodafone's stake, and the Street is unimpressed with the rest of Vodafone's business. This is the time to buy, he says, with shares down from 28 in September. Stroik contends Vodafone is cheap, based on its global assets, which include wireless networks with 155 million customers in 27 countries. He values Vodafone ADRs at 27 even before any sale. He sees Vodafone earning $1.95 per ADR in 2006 and $2 in 2007, vs. $1.93 in 2005. Arthur Russell of securities firm Edward Jones, who rates the stock a "buy," says: "The stock already reflects the worst scenario and is way undervalued."
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial