It’s been a busy week for Israel investors. For those subscribers to our new subscription newsletter, Israel
Opportunity Investor, they’ve seen one portfolio company, Gilat Networks (GILT), announce an acquisition for a premium. While we hate to brag and say “we told you so”, well, we told you so. Read more about how merger arbitrage investors might look at this deal.
We saw CFO musical chairs this week with the Gilat CFO moving over and joining another portfolio holding, Check Point Software (CHKP). While we’re on the topic of Check Point, we wrote recently about a Barron’s article that mentioned that Check Point could be an acquisition candidate. We’ve hear your remarks and invite you to give your opinion. Will donkeys fly before this happens or for the right price, will Check Point give it up. You make the call.
Forbes sees value in Israel real estate and has ranked it the top “up and coming” location globally. The financial publication sees 2008 as a very tough market for real estate but sees Israel as a bright spot for global investors
We also saw the first introduction of a true Israel ETF (ESI). You can read our run-down of what we think of the iShares product here.
IOI Portfolio company and Israel geothermal, clean energy play, Ormat (ORA), lands another Nevada deal.
The US Army is looking to invest in Israel water technology. Seemingly, the US Army invests sizable amounts in private equity and one of its funds is on the prowl looking to invest in Israel water technology companies. Read more.
Written by: Zack Miller | February 10, 2008
Not wanting to be remiss in giving an update on Israel Opportunity Investor portfolio member, Alvarion (Nasdaq: ALVR), we want to chime in with our two cents. We’ve been positive on the stock and have seen our thesis — that of further global uptake of fixed mobile services — came to fruition and even surpass what we were expecting. This is a critical lesson for investors: while stocks may perform financially as planned, how they trade is another matter.
We’ve seen the stock essentially pulverized by fear of weak global markets. Telecom spending typically gets pushed out during turbulent times.
That said, Alvarion’s not seeing that yet. In fact, while we continue to think the stock has a lot going for it, we are sensing a rising sense of negativity on the stock, driving it down off of what was ultimately a good reporting season and not too bad guidance in the headwinds of a weak dollar.
An article ran in SmallCapInvestor last week after Alvarion announced earnings and looked at how analysts were sizing up ALVR’s results. The way I read the results and how Susquehanna addressed them?
- Alvarion had a Q4 ahead of estimates and saw WiMAX revenues up over 50% from 2006.
- Higher operating expenses are certainly a negative for the company but the company attributed this to a weak US dollar.
What many investors and even analysts don’t appreciate is that the dollar has fallen like a rock versus the Israeli shekel. Israeli firms like Alvarion that trade in the US and are priced in dollars but conduct R&D/production in Israel are all feeling a squeeze. We’ve heard this from numerous Israeli CEOs. When the time comes that the dollar ultimately strengthens against the shekel, we’ll see a natural reversal in these numbers. My point here is that when numbers like this are clearly attributed to fluctuations in the dollar, earnings gains/misses are not organic changes in the business model.
This same analyst report that SmallCapInvestor disparaged actually comes out pretty positive on Alvarion. Susquehanna likes the Q4 surprise, likes the WiMAX opportunity, and Alvarion’s stable of international customers. Long term investors in Israeli stocks trading in the US will find it somewhat funny to think that a particularly strong shekel is weighing on earnings.
Disclosure: Author’s fund holds a position in ALVR and is long the stock as of 2/8/08.
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