Aaron Katsman
www.IsraelNewsletter.com

April’s Israeli CPI rose a much more than expected, 1.5% leading most analysts to predict that the Bank of Israel will raise interest rates by at least 0.5% at the end of the month. The inflation jump for April was the highest since 2002, and inflation over the last 12 is at 4.7%. IOIactually wrote about surging Israeli inflation some time back. The question for investors is how to play the rising inflation game?

I think that we will see a rotation out of local Tel-Aviv Stock Exchange stocks into Israeli stocks that trade abroad. Why? Because most of the large, locally listed companies are a play on the local consumption game. Keep in mind that Israel had been experiencing 5+% growth for the last three years. With surging inflation, and interest rates set to rise sharply, the local Israeli consumer is undoubtedly going to take it on the chin. All you have to do is walk into a local supermarket and you see how prices have risen. Tomato prices have almost doubled in the last few months, chicken, bread, other fruits and vegatable have all seen sharp price rises as well. The local consumer is sure to cut back spending, making local consumption stocks, not a particularly attractive place to park your money.

So what to do? As I said, I think we are at the early stages of a rotation into the Israeli companies that do most of their business outside of Israel. Hi-tech companies for the most part. We have seen a recent out-performance in these companies, and many have also produced stellar earnings reports. Companies like Given Imaging (GIVN), Syneron (ELOS) and Pointer Telocation(PNTR) have all blown past earnings estimates over the last few days.

If you are looking to invest in Israel, it may pay to take a long look at the Israeli stocks that trade in the US, as they appear set to outperform.

Disclosure: Author’s fund has a position in GIVN,ELOS, and PNTR. He has no position in any stock mentioned as of 5/16/08.

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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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By Aaron Katsman
IsraelNewsletter.com

While James Cramer was in the midst of his meltdown this week, one of his favorite stocks, Syneron(ELOS), came through with great earnings. As I have mentioned after their last report (a refined way of bragging), the company has gone from much hyped with little to show, to a serious company that is executing their business model efficiently. Syneron designs and sells medical products based on their own proprietary Electro-Optical Synergy, or ELOS technology. They promote their non-invasive procedures, like wrinkle reduction, hair removal, and skin rejuvenation. If all the global warming hysterics are right, just business from wrinkle reduction generated from sunburns will mean huge profits for the company.

Back to reality, this was a strong quarter for the company. CEO Doron Gerstel said, “Syneron’s sales continue to rise at a significantly higher rate than the growth of the market.” He went on to add,”In the second half of the year, we believe that the superior results of ELOS technology, as well as our unique customer care approach, will further strengthen Syneron’s position as the clear leader in our medical-aesthetic market segment. We are, therefore, increasing our guidance to $146 million, which is 25% revenue growth for the full year of 2007, from our prior guidance of 20% revenue growth for 2007.”

As baby boomers continue to age (say it ain’t so) with their high levels of disposable income, there is no question that they are looking for ways to recapture their youthful appearance.  Syneron is poised to provide that solution and as such, make it a very interesting long-term baby boomer play.

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Disclosure: Author’s fund is long ELOS as of 8/07/07.

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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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