Investor Insight: Jamia Jasper, The American Israeli Shared Values Capital Appreciation Fund
Written by: Aaron Katsman | September 10, 2008
Recently Israelnewsletter.com had a chance to interview Jamia Jasper, portfolio manager of The American Israeli Shared Values Capital Appreciation Fund. This interview shouldn’t be taken as a solicitation or recommendation to buy or sell securities. The views and opinions are solely of the interviewee, and are not that of Israelnewsletter.com. You should not consider the information here to consist in any way of investment advice, and you should speak with your own adviser and do your own research before making any investment decisions.
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Jamia, can you tell us about your fund?
Jamia Jasper: The American Israeli Shared Values Fund is an actively managed mutual fund that invests in the stocks of Israeli companies and U.S. companies that do business with Israel. It is a multi-cap fund with about 50% Israeli stocks and 50% U.S. stocks. In addition to the primary goal of long-term capital appreciation for investors, the Fund aims to expand the market for Israeli companies, making it easier for businesses there to raise capital and expand. Lastly, I have pledged to donate 7% of my personal profits from this venture, or a minimum of $5,000 per year, to charities and educational and research institutions in Israel.
How did you get started investing in Israel?
JJ: I have a business education and prior career experience as a credit analyst and a long history of personal investing. I noticed that many interesting technologies were coming out of Israel and that many of their stocks traded in the US. Israeli companies are conservatively managed with low valuations, allowing for significant appreciation potential. I did well with my initial investments and began looking for other ways to invest in Israel. At the time there was one index Fund for Israeli stocks and no actively managed mutual funds. I was very surprised that a big investment house had not already created an Israeli mutual fund. I decided to create one to satisfy the needs of other investors looking to invest in Israel, whether for investment purposes or for a show of solidarity.
Can you tell us about some of the Israeli stocks that trade in the US?
JJ: All of the companies listed below are in the portfolio because they have solid business fundamentals, excellent management, are debt-free, and have good free cash flow.
ESLT– Elbit Systems focuses on advanced solutions in defense electronics. It is a growth company due to the early stage of adoption of its products in the market. The company is experiencing rapid earnings growth and the shares trade at a reasonable multiple of earnings and cash flow. Also, it is a defensive play given its lower exposure to economic cycles. The company is winning an increasing number of contracts from countries outside its traditional market of the U.S./Israel, in places such as Europe, India, and the Far East.
NICE- Nice Systems is a provider of solutions that capture, manage and analyze unstructured data. Its largest clients include the U.S. government for homeland security monitoring and financial companies for compliance purposes. NICE has organic sales growth of 12-15% annually, no debt, and approximately $150 million in free cash flow, which equates to a free cash flow yield of 7-8%. The company can buy back 25% of its outstanding shares, which would increase EPS by 20% or it can institute a dividend of 5% or more. The shares appear undervalued at the current price of $28.
GIVN- Given Imaging Ltd. is a medical device company that specializes in non-invasive, wireless technologies to diagnose gastrointestinal disorders. It has a unique, principal product, the Pillcam SB, which is a dissolvable pill that takes color video of the gastrointestinal tract. It is sold in 60 countries worldwide. The company has a solid balance sheet, with more than $100 million in cash and no debt. Currently the U.S. and Japan have insurance carrier coverage for the products. The French government is expected to provide reimbursement for the product in 2008. Given Systems could be an attractive acquisition target for any of the large GI or diagnostics companies.
TEVA- Teva Pharmaceuticals is the largest generic drug manufacturer in the world. Generic drugs are part of the solution to the world-wide healthcare cost crisis. Their next big leg of growth should be generic biotechnology since the company already has the unique capability to produce protein-based drugs (as opposed to chemicals). Teva also has excellent research capabilities in conjunction with other Israeli research institutions. In addition to organic earnings growth from its generic drugs and proprietary treatments for MS and Parkinsons, the company just reached an agreement to acquire Barr Labs. Barr is a U.S.-based generic drug manufacturer with 25 applications for generics already filed with the FDA. The acquisition of Barr is expected to be accretive to Teva’s earnings shortly after the transaction closes.
Tell us about some of the companies that you hold that do business in Israel? Why is the Israel piece interesting?
JJ: The US companies in the portfolio must have a business relationship with Israel. These include:
MSFT- Microsoft has been in Israel since 1991 with core R&D and start-up incubation activities, as well as venture capital outreach to create partnerships with the local pool of high-tech talent. Windows NT and XP were developed in Israel. Right now, the stock is incredibly cheap at 12x earnings and $23 billion of free cash flow in fiscal 2008 (8% fcf yield).
MDT– Medtronic is a medical device company that, among other things, controls nearly half of a $6 billion global defibrillator market. Its fastest-growing businesses include products for diabetics and small electrical implants used to alleviate pain and to treat neurological disorders. Medtronic has offices in Israel, which are primarily sales offices, but also are used as a base for discussions with Israeli medical device R&D companies. The company has expected earnings growth of 11-15% for 2008 and the shares currently trade at a significant discount to historical valuation.
AMGN – Amgen is one the world’s largest biotechnology companies. The company has a licensing agreement with the Israeli company Gamida Cell Ltd., to share several of its proprietary cytokines in the manufacturing of Gamida’s StemEx, a treatment for hematological diseases. Amgen will receive a minority equity interest in Gamida Cell in addition to royalty payments from future sales of StemEx. Right now AMGN is selling at a low 14x EPS and free cash flow is estimated to climb to $5.4 billion in 2008.
CAT – Caterpillar sells their tractor and trailer equipment to the Israeli military. While it is not a significant part of their business, the company has shown loyalty to Israel by continuing to sell to them despite threats of boycotts. From an investment perspective, CAT is benefiting from the boom in mining companies purchasing large machines. Right now the company trades at 11x earnings. Last year the company had $5 billion of free cash flow, which is nearly a 10% free cash flow yield. This is very high, even for a cyclical company like CAT.
Thanks.
Jamia C. Jasper is the portfolio manager of the American Israeli Shared Values Capital Appreciation Fund and has been responsible for the Fund since its inception in 2007. Ms. Jasper has committed her own capital to establish and launch the Fund and its investment advisor.
Ms. Jasper’s background includes nearly a decade in investments and financial services and several years as a staffer in the US House of Representatives. Jamia was most recently with the Bank of New York, where her responsibilities included the financial analysis of public companies. Prior to joining the Bank, Jamia worked for Jones Lang LaSalle, a leading real estate and investment management firm. Ms. Jasper holds a BA in International Relations from the University of Southern California and an MBA from Cornell University.
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