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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Aaron Katsman
www.IsraelNewsletter.com

In an ironic twist, the Israeli Ministry of Communictaion, is going to try and take a more active role in solving problems that have beset cellular companies, like Partner(PTNR) and Cellcom(CEL), as they try to deal with customers switching providers and keeping their same phone number. In what was hailed as a victory for the consumer,  the government’s ineptness to provide solutions and guidelines that both work and are efficient, have caused major delays for those trying to take advantage of the new law.

As I mentioned in a previous post when the program started, the ministry did a poor job of getting the word out about the new program and many consumers didn’t even know that they were now able to keep their cell number but switch carriers. Now there is another issue; a problem in data verification procedures between the companies, which has resulted in bureaucratic difficulties and delays in portability. Why does this problem exist? You guessed it. The ministry can’t figure out what to do. Communications industry sources claim that the ministry has not finalized its own number portability procedures and that it issues new guidelines on the subject every few days.

I am shocked! But what gets even sadder( or funnier- depending on perspective) is that “The Ministry of Communications also announced today that it intended to expedite the handling of problems and to take a more active supervisory role.”

Now I feel confident that the problems will get taken care of. Not.

Disclosure: Author’s fund holds no position in any stock mentioned, as of 12/13/07.

Please see our Disclaimer HERE.

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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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Aaron Katsman
www.IsraelNewsletter.com

The new law enacted by the Israeli Ministry of Communication enabling consumers to switch cellphonecarriers while keeping their existing phone number has gone into effect. Reports are that only a few hundred consumers have actually switched carriers. Part of the problem is that most consumers don’t even know that there is such a law.

In a very unofficial poll that I took both on the street and in my office, about 75% of the respondents didn’t even know that this change was happening. It’s ironic that a reform that is intended to benefit consumers, hasn’t even been brought to their attention. Oh the wonders of government! Even when they try and do something beneficial, they screw it up.

This lack of customer awareness may actually be quite beneficial for both Partner(PTNR) and Cellcom(CEL). Both companies were expected to increase marketing costs substantially in order to both attract new, and keep old customers. The fact that nothing is going on will help them keep their costs in check.

Check out Zack Miller’s  analysis of the Israeli cellular industry.

Please see our Disclaimer HERE.

Disclosure: Author has no positions in any other stock mentioned as of 12/02/07.

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Aaron Katsman is the 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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BigBand (Nasdaq: BBND) lands a deal with Charter Communications (Nasdaq: CHTR) for its switched digital video solution. Charter is the fifth operator to initiate commercial deployments of BigBand’s SDV solution. The five largest cable operators in the U.S. have now selected BigBand’s SDV. Check out our recent coverage of BigBand.

Motty Zisser, Elbit Medical’s (Nasdaq: EMITF) head, is already mulling expanding the Budapest Arena Center. The 66,000-square meter mall is Hungary’s largest mall and is fully occupied. The center was sold in August and it looks like Elbit Medical may see a gain of 1 billion NIS on the sale.  See our coverage of Elbit Medical’s strategy here.

Merrill Lynch upgrades Israel cellular provider, Cellcom (NYSE: CEL).  The bank said, “Despite the share price rallying 17% in the past month, we see two reasons to recommend purchase. First, we find a prospective 7.6% dividend yield compelling and, second, we see scope for additional cash returns with current net debt only 1.3 times earnings before interest, taxes, depreciation and amortization (EBITDA) and well below management comfort levels of 2.5 times.”

Israel theft-prevention firm, Ituran (NYSE: ITRN), whiffs on earnings by $.03.

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