Aaron Katsman
www.IsraelNewsletter.com
Remember the 80’s Hall and Oates classic ‘Private Eyes’? Who can forget such powerful lyrics: ”Private eyes They’re watching you They see your every move Private eyes They’re watching you Private eyes They’re watching you watching you watching you watching you.”
Well flash forward 27 years. How right they were. If you happen to be a proprietary trader or stockbroker, and you are thinking about becoming a famous rogue trader, think again. While you may get famous and bring down a huge bank like Societe Generale, your chances of landing in prison just increased. Why? Because of Israeli ingenuity. Actimize, a NICE Systems (NICE) company has launched a surveillance product for rogue trading detection.
The company worked with financial institutions to develop a product that meets the needs of the firms.
“In response to regulatory pressure and rogue trading events in early 2008, large firms around the world are reviewing their systems and risk management processes,” said Axel Pierron, senior vice president at Celent. “Solutions, such as Actimize’s, that provide a centralized view of trading activities supervision as well as employee surveillance are clearly matching the current needs for ‘rogue trading’ prevention solutions in the financial industry.”
Long-term investors may want to take a long look at NICE. With a continued focus on tracking money flows, even if we see a slowdown in IT spending in the financial services industry, NICE may not see that slowdown. In many cases this is becoming required spending, and slowdown or not, NICE’s product suite will be in demand. Coupled with continued strong EPS growth, NICE, potentially, maybe an interesting long-term play.
Forget about any monkey-business, They’re watching you watching you watching you watching you ……..
Disclosure: Author’s fund has a position in NICE. He has no position in any other stock mentioned as of 5/12/08.
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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.
This interview with an asset manager active in Israeli markets 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 about your firm?
Marc Lesnick, Fortissimo Capital: Fortissimo Capital Fund is a special situations Israeli-related private equity
fund focused primarily on maturing technology companies that are at a point of inflection. We provide transformational capital, taking an active role in assisting portfolio companies with improving fundamentals and facilitating growth. Our initial fund manages in excess of $100 million and is backed by the leading Israeli financial institutions (banks, insurance companies and pension funds). We plan to initiate fund raising for our second fund in the coming weeks. (Continue »)
By Zack Miller
IsraelNewsletter.com
This Friday, JPMorgan initiated coverage on Ness Technologies (NSTC) with an Overweight rating. Ness Technologies is a global provider of IT services and generates almost 50% of its revenues within Israel.
NSTC competes locally in Israel with companies like Malam, Matrix, Elbit (see our previous articles on Elbit), and Teldo. Ness also competes against multinational firms like Accenture, BearingPOint, CSC, EDS, IBM, and HP. Their offshore development group competes against Cognizant, TCS, Infosys, Wipro. They also compete against product development firms (think Persistent Systems) and against internal IT departments of potential clients.
JPMorgan enumerates 4 reasons why NSTC is poised for growth:
- Penetrate North America and Emerging Markets: JPMorgan cites that 40% of global IT spending is spent in North America. Ness recognizes this opportunity and is looking to penetrate specific niche areas (like product development) which align with its existing domain expertise. NSTC is also focused on building out its presence in emerging markets like Eastern Europe and Asia. Having almost 50% geographic exposure to Israel has always been an issue surrounding Ness — it appears that NSTC is serious about diversifying its revenues globally.
- Maintain Leadership Position in Key Verticals: JPMorgan is encouraged with NSTC’s leadership position in defense and government verticals in Israel and in Independent Software Vendors in the US. NSTC can leverage these leadership positions to expand geographically and build competencies in other verticals. Ness and Israel are on the cutting-edge of defense technologies and certainly can parlay this experience into competing for US Department of Homeland Security spending dollars.
- Maintain Long-Term Client Relationships and Build Out Offshore Presence: Ness is attempting to lock-in customers into longer-term relationships, representing a more annuity-type revenue stream. JPMorgan cites that repeat clients represent 85% of the company’s revenue in Q107. The banking firm is also encouraged by Ness’ focus on building-out its low-cost delivery capabilities, particularly in India and Eastern Europe. This will take the lumpiness out of NSTC’s revenues and allow Ness to pursue lumpy contract work for the US Department of Homeland Security.
- Pursue Strategic Acquisitions: So far, Ness has pursued small tuck-in type acquisitions to build delivery competence, penetrate new geographies, or expand its service line/industry vertical capabilities. JPMorgan expects the company to continue along this path.
That said, all is not clear sailing for Ness. JPMorgan expects a soft second quarter due to Jewish holidays in Israel, some coninued weakness in US and India business. Down from a high of 17 in late ‘06, NSTC hasn’t performed well in 2007. Margins may be compressed in the near future (due to Rupee appreciation and Israeli commercial biz) and need to trend higher for investors to start feeling more comfortable in the stock.
JPMorgan likes the stock for investors seeking one of the best Israeli IT companies expanding internationally with good Free Cash Flow and a strong balance sheet (A 35% increase in backlog probably helps as well).
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Disclosure: Author’s fund is long NSTC as of 6/1/07.
