The entire interview with Stearman Capital’s, Zachary Scheidt, is part of our new subscription newsletter, Israel Opportunity Investor. You can find out more about the product and the opportunities we cover at www.israelnewsletter.com

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Can you tell us a bit about your firm?

Zachary D. Scheidt: Stearman Capital is unique in that it focuses on stocks that are new to public markets. While our formal universe includes stocks that have been public less than five years, most of our investments turn out to be companies that have issued stock within the past 12 to 18 months.

We believe that there is an information disconnect for many names in our universe because up to this point there has been little or no media or analyst coverage leading up to the IPO. Once a company comes into the public realm, the first people to write about the names usually have an agenda. Underwriters issue reports after the quiet period is over with the hopes that their positive rating will propel the stock higher. This helps their reputation when soliciting investment banking business from other clients and also creates goodwill with the management of the newly issued stock. Goodwill is important in their business model because a large portion of companies who issue public stock come back to markets to raise additional capital.

I believe that Stearman is able to capture positive returns by digging through the primary information from the company as well as third party research to find the nuggets of truth that point to the eventual direction of these often misunderstood stocks.

One more advantage that we have is our relationships with multiple underwriters. When a company is pricing an IPO, we take calls from most of the major brokerages selling the deal and are able to pick up on the demand for a particular issue. If a contact calls in and says, “This deal is going to be red hot and I can get you as many shares as you want!”, we know that there is excess supply and the underwriters are pushing to get the deal sold. So, while you have to read between the lines at times, the relationships with these important firms gives us an edge that is difficult to quantify and nearly impossible to duplicate.

How does a firm located in Atlanta, GA start investing in small Israeli companies?

ZS: Well, believe it or not, the process is very simple. As Israel’s economy continues to evolve and new enterprises demand capital for expansion, companies often come to US markets to raise that capital. With technology making the world smaller every day, our research process is able to grapple through the same information that hits the desk on the 87th floor of a Park Avenue office (with considerably less overhead, I might add) and we are able to make a well-informed decision based on publicly available information.

To me there is not much difference in picking a stock based in NYC, San Francisco, London, Buenos Aires, or Tel Aviv. While currency issues come into play, local culture and customs are of course important, but the bottom line is whether I can make money trading the stock or not. The price of the stock will fall in line with supply and demand and that will be based on the public expectation of the future prosperity of the business. So if I can get an edge on what that public perception will be, I can trade a stock successfully, no matter where the company is located. (Continue »)

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The entire interview with Pointer Telocation’s Chairman, Yossi Ben Shalom, is part of our new subscription newsletter, Israel Opportunity Investor. You can find out more about the product and the opportunities we cover at www.israelnewsletter.com

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Hi, Yossi. Can you tell us about your company?
Yossi Ben Shalom, Chairman: Pointer Telocation (Nasdaq: PNTR) develops and supplies location based technologies and provides numerous value-added services to car dealers, auto manufacturers, insurance companies, and fleet managers, including road-side assistance, vehicle towing, stolen vehicle retrieval, and fleet management.

We accomplish this through 3 major sets of technologies:

1. Radio Frequency (RF) systems: these are technologies that communicate and locate an automobile. It’s basic technology that was invented around WWII but we’ve developed it into a low cost system, consisting of bay stations and network management tools. With all of our experience we have created a complete system, and it would be complicated and expensive for someone to come along and try to duplicate our system.

2. Cellular units: We’ve combined GPS and GPRS together in a box with embedded software. We’ve developed our technology with a high sensitivity to both power and air time consumption. We have more than 100,000 units that we’ve sold into the automotive aftermarket, making us a serious player. We have developed an expertise through our experience with different customers, different demands, and working across numerous countries.

3. Command and Control: we’ve invested heavily in developing a very sophisticated system used for fleet management and stolen vehicle recovery (SVR). We can sell our products to car owners, insurance companies, dealers, auto manufacturers, and even to the authorities.

We feel that the market for our products is not yet mature, so we need to offer services to promote consumer uptake. Having our own technology allows us to win new markets for our services. Our main competitors, Lo-Jack (Nasdaq: LOJN) and Ituran (Nasdaq: ITRN), both have similar models.

What’s the difference between Pointer and a company we are more familiar with, AAA?
YBS: First of all, AAA is a US-based service and in 2007, we’ve done no business in the U.S. (Continue »)

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Aaron Katsman
www.IsraelNewsletter.com  

With the investing public inundated with information from all sides about hot stocks to buy, the question for an investor is should investments be bought sight unseen or not? In my view, the point of a blog, aside from giving me a much needed platform to run my virtual mouth, is to present investors with investment ideas. There are thousands of stocks out there,  and the vast majority of the investing public is unaware that they exist. A good blog should be able to present those companies to readers in a concise format, and then it’s up to the reader to kick the tires and see if the investment makes sense as part of the overall portfolio.

The IOI blog is not about recommending stocks. If you want stock picks, sign up to our subscrition newsletter. The blog is about uncovering small Israeli companies that trade in the U.S., of which outside of TEVA Pharmaceuticals(TEVA) and Checkpoint(CHKP), most investors have never heard of.

You are probably asking yourself right about now: why am I writing about this? The reason is that a small newsletter actually took information from our blog, and without ever calling us and asking us what the theory was behind our post, went ahead and recommended the stock to their subscribers, and then had the gall to insult us. If an investor should take the time to research investments, shouldn’t an investment newsletter take the time before issuing a recommendation on a stock they know nothing about?  What is important is  if you read this blog, or watch CNBC, that you don’t hear about a stock and then immediately enter a trade. Do some homework, check out other research and only then pull the trigger.  

Disclosure: Author’s fund holds a position in TEVA and CHKP. He has no position in any other stock mentioned as of 1/3/08.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter.  Stay ahead of the game and make smart decisions in Israel stocks.  Go here to learn more.

Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

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