For those who think that the local Israeli economy is immune to a global economic slowdown, today’s economic numbers on consumer confidence, may want you to think again. Globes reports that the index dropped to its lowest leevl in 4 years.

The article says: “The Consumer Confidence Index has been falling since the third quarter of 2007, even before there were signs that the economy was entering a slowdown. The index indicates that the public has sensed the economic trends for a long time, even as official macroeconomic data only now shows declines in private consumption and slower growth.”

With so much of the recent local economic success due to strong consumer spending and optimism, this continued deline in confidence, could spell the end of the current economic cycle. Growth estimates have been sliced, and while official estimates are still over 3% GDP growth for the year, with a slowing consumer and export companies reeling from Shekel strength I think we may be hard pressed to achieve those numbers. Keep in mind that israel has been late to the game concerning an economic downturn. That doesn’t bode well for ‘09 growth, which may continue to sag.

So where is there room to be optimistic? With the USD staging a recent comeback and pushing through the 3.6 barrier, the investment opportunities ahead may lie with export driven industries, especially the much sought after Israeli hi-tech industry. With this industry under performing over the last year or two, it may be time for Israeli hi-tech to make a comeback.

Please see our Disclaimer HERE.

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.

Share with others:

Aaron Katsman
IsraelNewsletter.com

The Israel financial daily Globes is reporting that email animation company Incredimail (MAIL) wants to reprice options for 5 senior managers. The company which works in the space of email animation, clearly has a problem distinguishing between reality and fiction. The stock is down more than 40% YTD, there was a management shakeup, issues with Google (GOOG), and senior management wants to reprice their options? I don’t know, are they planning to sell the company for some kind of premium and attempt to make a boatload of money on the transaction, while all investors will see is a slightly lower tax loss?

According to the article: “The options are held by Incredimail CEO and director Ofer Adler, who is the company’s largest shareholder, president Yaron Adler, the company’s second-largest shareholder, chairwoman Tamar Gottlieb, and directors Yair Zadik and Gittit Guberman.”

I would understand if the company wanted to reprice employee stock options (ESOP) as they would want to retain their employees, but senior management? My hunch is that most investors wouldn’t mind if senior management was let go. Why should these executives profit when investors have seen tremendous losses? Why should 2 directors and the chairwoman get their options repriced? (Continue »)

Share with others:

Aaron Katsman
IsraelNewsletter.com

BluePhoenix Solutions (Nasdaq: BPHX) a leading provider of value-driven legacy modernization solutions was absolutely pounded yesterday on the heels of a couple of analyst EPS downward revisions. The Israeli company saw its stock fall more than 30% as analysts viewed the strong Israeli shekel as impacting earnings.

As reported in the Tech Trader Daily: “Roth Capital’s Nathan Schneiderman notes that Blue Phoenix has nearly 30% of its headcount in Israel, vs. less than 10% of its revenue. He notes that the shekel has appreciated 5% against the dollar since the company provided guidance on May 1.”

“Craig-Hallum’s Jeff Van Rhee made a similar call this morning, lowering EPS estimates “to reflect currency and increasing macro challenges internationally.”

Both analysts lowered future earnings estimates. Schneiderman cut his estimates by about 7-8%. So why should the stock have gotten crushed by 30%? It’s not exactly like BluePhoenix has been soaring and investors are being brought down to earth. It’s not exactly a secret that the Shekel has been strong. I find it hard to believe that investors were “shocked” to see that currency issues would impact earnings. At IOI we have been speaking about this issue for months. In fact both analysts have new $15 price targets. Even pre-rout that was a 50% premium to where it was trading, now at under $7/share we have a target more than 100% above the current stock price.

I am certainly not saying to run out and buy the stock. I am saying something strange is at play here. They are basing their call for ‘09 on continued shekel strength and too much exposure to the financial sector. Have these analysts turned in forex traders? Are they predicting that the Shekel will rise for another full year? Neither one of these issues is new, so why are they only waking up now and dropping numbers? After all the Shekel has been surging higher for more than a year, and we all know that banks will probably chop some IT spending in order to cut costs.

Is this another case of analysts making a call after the fact? If so keep an eye on BluePhoenix, as it may potentially turn into a juicy contrarian play.

Disclosure: Author’s fund has a position in BPHX as of 6/20/08.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

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.

Share with others:

Aaron Katsman
www.IsraelNewsletter.com  

I would like to start by taking this opportunity to wish my wife, Yael “Nefesh B’Nefesh” Katsman, a belated happy anniversary. Our anniversary was actually yesterday, and NO I didn’t forget, we had a tasty dinner, I just didn’t mention it in the blog. Give me a little credit.

The big news of the last 24 hours is the intervention in the currency market by the Bank of Israel (BOI). Yesterday afternoon in after-market trading the Shekel/USD rate fell to approximately 3.34. Then came the news that the BOI was intervening for the first time in more than a decade, and that send the greenback back up more than 1.5%. Today, the BOI announced more intervention, and that is helping the dollar even more. Local media reports have said that the BOI wants to get the exchange rate back to at least 3.60, which is about 4% high than today.

Why the sudden move by the BOI? The shekel has been the second strongest currency in the world YTD, and the impact on exporters has been huge. Losses continue to mount for them, and the BOI needed to do something.

This move could have profound impact on some Israeli stocks that trade in the US. Companies like Alvarion (ALVR), Nice Systems(NICE), Amdocs(DOX), all do R&D in Israel and their expense lines have increased due to the strength of the shekel. The recent BOI intervention could potentially have positive ramifications on earnings for these companies.

Disclosure: Author’s fund holds a position in ALVR, NICE and DOX. He has no position in any other stock mentioned as of 3/14/08.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

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.

Share with others: