Today’s news that Gilat Satellite Networks (GILT) is going to be acquired for $11.40 a share, should come as no surprise to IOI readers. We hate to brag, but we called this one a while back. This continues the IOI trend of predicting M&A, as we called the ECI Telecom deal as well. Maybe it’s time that you subscribe to our premium product( Subtle huh).
The price is about a 10% premium to Friday’s closing price.
The investor group includes Mivtach Shamir, The Gores Group LLC, DGB Investments Inc. and companies affiliated with Roy Ben-Yami, Ami Lustig and Eytan Stibbe.
While I thought that the company should remain independent and continue to grow, for the company and large investors, the deal was too good to pass up.
For merger arbitrage investors, keep your eye on how Gilat trades over the next few months. With the deal set to be completed in September, any weakness in the stock could make for an interesting play. After all a potential 6-10% return in 5 months, is nothing to sneeze at, especially in markets that can’t seem to go up.
Disclosure: Author’s fund holds a position in GILT. He holds no position in any other stock mentioned as of 3/31/08.
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.
After numerous rumors of its emergence and a waiting period that rivaled Godot, finally an pure Israel ETF emerged from the big players. iShares launched the iShares MSCI Israel Capped Investable Market Index Fund (EIS). Get the prospects here and the fund fact sheet here. The iShares page on the ESI is here.
I wrote recently about an ETF targeting Israel. In “Is a newish ETF a good way to invest in the Jewish state?“, we examined the new SPDR Emerging Middle East & Africa (GAF). The take-away was a bit disappointing as South Africa’s presence in the ETF weighed in at over 60% and TEVA Pharmaceuticals (TEVA) was a full 9% holding of the fund. So, not a great way to play:
1) Israel as an investment destination (and there are plenty of reasons to want to do that, see this and this.)
2) Not a great way to play the Middle East or Africa as South Africa’s overwhelming presence kind of skews this as a South African play with some exposure to banking, pharma, chemicals and tech in Israel.
Something new
So, we’ve been waiting anxiously to see a ‘real’ Israeli ETF and it appears that the iShares MSCI Israel Capped Investable Market Index Fund (EIS) is a good start. Remember, the First Israel Fund (ISL) and the Amidex35 (AMDEX) also provide access to the Israeli market but I think investors may be waiting for an iShares-like product for some more trading liquidity.
Couple things here:
1) This ETF invests in local, Israeli shares. Not ADRs. This is typically a good thing as some of the interesting things going on in the Israel thesis are taking place on the ground in Israel.
So you have exposure to the Israeli shekel which as we’ve spoken about a lot previously, has been one of the strongest currencies in the world over the past year. Because the ETF itself is priced in dollars and invests locally in Israel, investors would benefit greatly from the currency exposure in a strengthening shekel environment and take a hit if (when?) the shekel begins to weaken, something the Bank of Israel is currently attempting to do.
This is neither ‘good’ nor ‘bad’ but there will be movement in the exchange rate that will affect returns one way or another, perhaps even inversely to the performance of the individual stocks that comprise the fund. Meaning, say the Israel market (specifically, these companies held by EIS, go up 15% (not a bad year) and the shekel depreciates vis-a-vis the dollar by more than that, add in fees and you’re looking at a down year.
2) Whoa! Teva clocks in at a hefty 25% of total assets. On the Tel Aviv Stock Exchange’s TA-25, Teva is “only” 9% or so of market cap weighting. Still a lot but nowhere near 25%. That’s a lot of exposure to one company and one industry when trying to get exposure to Israel as a market.
3) The top 10 holding comprise almost 70% of the ETF’s holdings. I assume iShares did this because it needs liquidity in some of the bigger names but this somewhat skews the exposure to the Israeli market. It’s a lot of concentration in just a few names and overweights health care and financial and underweights tech and telecom.
Given this concentration, you have the following exposure to Israeli industries:
a) Health Care 25%
b) Financial 22%
c) Materials 16%
d) IT 12%
e) Industrials 10%
f) Telecom 7%
g) Consumer discretionary 3.6%
h) Energy 2%
i) Consumer staples 2%
I’m not saying this positively or negatively either but Israel’s GDP has been solidly around 5% for the past couple of years. That’s interesting but as a technology investor with exposure to Israel, I’m looking to invest in the sexier, high-tech firms that capitalize on Israeli Ingenuity, not invest in local cellular operators facing 120% subscriber penetration. That’s NOT to say someone looking for global diversification won’t find this ETF interesting. They may very well find this ETF as a good way to play the local Israeli economy with exposure to the shekel. It’s just not my personal thesis.
Disclosure: Author holds a position in TEVA and numerous Israeli stocks via the Israel Growth Fund, a fund of which his partner, Aaron Katsman, is the portfolio manager.
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.
Do you feel a chill in the air? Well if you do it’s because there is no more global warming. Now you will probably ask, “What do you mean there is no more global warming?”. After all former VP and nobel prize winner Al Gore said in an interview to 60 minutes (excerpt):
Confronted by Stahl with the fact some prominent people, including the nation’s vice president, are not convinced that global warming is man-made, Gore responds: “You’re talking about Dick Cheney. I think that those people are in such a tiny, tiny minority now with their point of view, they’re almost like the ones who still believe that the moon landing was staged in a movie lot in Arizona and those who believe the world is flat,” says Gore. “That demeans them a little bit, but it’s not that far off,” he tells Stahl.
So if the smug and pompous one himself declares that there is global warming, how can I say there isn’t? Well aside from the scientific fact that there isn’t, the real reason is that the citizens of the Israeli city of Tel-Aviv put an end to it last night. From 8-9pm local time Tel-Aviv turned out the lights. For one hour citizens were urged to turn off their lights in an effort to save energy, and help limit damage to planet. There was even an “unplugged” concert attended by tens of thousands of people, and whatever power was needed was generated by bicyclysts peddling away and generating energy.
It was just beautiful, everyone sitting around in the dark, really making a difference. As an old fashioned male, I tend not to display my emotions in public. But after this event, I just couldn’t keep it in. I must admit it, I shed a tear.
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.
