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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It is important to understand that share price, principal value and return will vary, and you may have a gain or loss when you sell your shares. All mutual funds can be affected by market and investment style risk. The Fund’s investments in small and mid capitalization companies could experience greater volatility than investments in large capitalization companies. Request a prospectus, which includes investment objectives, risks, fees, expenses and other information that you should read and carefully consider before investing. A prospectus can be obtained by calling your investment professional.
It appears that due to the popularity of Israelnewsletter.com( or maybe not), and the fact that the investing public wants to get more news on the Israeli capital markets, it’s rumored that financial media powerhouse Bloomberg, is planning to open up an office in Israel’s capital city, Jerusalem. According to a report in Globes, “that financial wires services company Bloomberg LP will open its first office in Israel on September 10, and has rented space in Jerusalem’s Malcha Technology Park.” The article continues, “It seems that Bloomberg understands that the Israeli capital market is important enough to open an office here, and that’s a good thing.”
Along with all the innovation coming out of Israel, and all the foreign investment pouring in, this is another step for Israel becoming a financial center.
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.
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.
IsraelNewsletter.com had the chance to sit down with an amazing, young pair of college students who are leading an innovative initiative that will give college students hands-on exposure to the Israeli economy by learning and by doing. The TAMID Israel Investment Group at the University of Michigan is just the tip of the iceberg for this pair.
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Tell Us A Bit About TAMID Israel Investment Group.
Eitan Ingall, President: This whole idea started because Sasha Gribov and I are both the Presidents of Pro-Israel groups on campus at University of Michigan. Sasha is head of the Hillel group, American Movement for Israel and I am currently heading up a pro Israel political advocacy group called the Israel Initiative for Dialogue Education and Advocacy. We have both noticed a serious void in hasbara (Israel advocacy) on our campus in that there is a serious lack of sustained and substantive interaction with Israel. Sure, anyone can go hear a lecture or seminar for two hours, but what about interacting with Israel in a way that runs a bit deeper?
We also noticed that for all the hummus and pita we were providing the students and for all the guest speakers coming to campus to talk about Israel, no one was talking to the business students. No one was talking about Israel’s economy and speaking directly to the future Jewish business leaders of the world.
So, those two things—the combination of the lack of substantive and sustained interaction, coupled with a serious lack of interaction with Jewish business school students—were what drove us to establish this fund.
What we also understood, however, was that in order to attract business minded Jewish students to Israel, we had to reach them in their space. What are they interested in? What makes them tick? And how do we align these interests with the greater collective of Israel and the Jewish people?
What are their interests? investing and finance. So we came up with quite a simple way to align these interests with Israel—we created a student-led investment group that manages a portfolio of Israeli companies. It’s actually quite simple. These students are all joining investment clubs anyway. They want something they can slap on a resume and something that will give them real life experience with the investment landscape.
So, we said, how about we have them do all this while investing in Israel? Its quite a simple solution.
And so we created the TAMID Israel Investment Group.
The structure of the group is also very simple and is designed to target the specific interests of each student. The Executive Board is made up the fifteen most talented Jewish business minded students at the U of Michigan. We shouldn’t say only Jewish, we do in fact have a non-Jew on the board as well.
How does the board work?
EI: The board is broken down into 4 teams: investing, marketing and PR, IT and fundraising. The investing team has students who are incredibly well-versed in investing—some of them have already begun to manage money professionally. The marketing team is currently led by a girl who recently had a job with Walt Disney’s Marketing department. A member of the fundraising team was the president of his regional USY chapter and has raised tens of thousands of dollars.
The IT team has a few kids double majoring in Computer Science and business—they’re designing a highly advanced and interactive website for the group.
As you can see, we’ve made it a priority that each student is working in an area that interests him or her. This isn’t the usual, mundane form of Israel advocacy. What we’re trying to say with TAMID is, “This is Israel and all that it has to offer you. This is Israel’s economic environment.” Plain and simple. In a way that students can relate to and enjoy. TAMID brings a perspective on Israel that these students can fit in with their professional aspirations.
The board also has the opportunity to interact with four support bodies.
The Advisory Board is made up of top Israeli executives and fund managers who have commitment to interacting with students once every financial quarter. This gives students an opportunity to interact with Israelis who have built the economic culture of the country and will leave a lasting impression on the students.
The Resource board are American and Israeli lawyers and accountants who are working to establish and maintain the infrastructure of the organization
We are working with three U of Michigan business school professors who are overseeing the general operations of the group and are assisting with the educational curriculum.
We will also be working with Israeli students at Israeli universities to align our generation of business minded students. Students will have the opportunity to interact through various forms of media and will work together on various projects.
Please explain a bit about how it all works.
EI: There are three phases to the fund: Education, Investing, and Fund Management
During the educational phase students are engaged in a curriculum that teaches them about general investing and Israel-specific investing through a series of seminars, lectures, guest speakers and interactive activities. It is during this phase that students will have their first interactions with Israel’s economic landscape in an effort to prepare for investing.
Next, the students make the initial investment, and thus begin investing the portfolio.
We are in the process of raising $1,000,000 [ed. Fundraising activities are taking place through TAMID's channels. IsraelNewsletter.com is not party to these activities]. Professional Israeli account managers will manage half of this in order to reduce risk. These account managers, however, have committed to maintaining a high level of interaction with the students in order to teach them about the Israeli economic environment.
The other half of the portfolio will be managed by the Executive Board, led by the investing team. They are working to create a conservative growth investment strategy that will allow the students to interact with Israel’s economy. The students will use what they learned from the educational phase of the program coupled with their interactions with the professional account managers, to successfully manage this half of the fund.
For the duration of the program, students are actively managing a portfolio of Israeli companies. They are making day to day investment decisions while interacting with Israeli company executives to be constantly learning about Israeli markets. The Executive Board thus becomes fully engaged with Israel’s economic environment.
So if the principal of the fund comes from tax-deductible donations, not investments, what do you plan to do with the returns?
EI: The fund is a perpetual fund, hence the name TAMID. It stays on the college campus and the money stays in the Israeli market. Therefore, a large portion of the returns are re-invested in order to grow the fund.
The remainder of the ROI will be used to establish the TAMID Business Scholarship Fund, where we will be providing financial compensation for business minded students to work in Israel. We have begun working with Israeli companies to set up infrastructure to house 1-2 business students for an internship. Our dream is that instead of working one summer for an investment bank in Manhattan, students will come work in prestigious financial internships in Israel, which they can use to further their own professional aspirations.
How did you elect students to the board?
EI: We sent out an initial press release in February of 2008. After receiving an overwhelming number of inquiries, we set up formal interviews with the most qualified students over the course of the following two weeks. We then selected 15 of the brightest, most experienced students for TAMID’s Executive Board. It is a prestigious group of students. These are the students going on to top jobs in the American financial sector and working their way to becoming business leaders and top executives.
How is this an answer to divestment?
EI: The initial idea for the group actually came out of a response to divestment. As two leaders of campus pro-Israel organizations we knew resolutions calling for the divestment of Israel are brought before the regents of the University of Michigan. To counteract these resolutions in the past, students have launched pro-Israel flyering campaigns and invited high-profile speakers to campus to speak about Israel. However, we felt none of this was enough and we felt we could come up with something more creative and more effective that would have a profound impact on our generation of Jewish college students.
So, at 4am in the study lounge, we looked at each other and said: if they want to divest from Israel, we are going to invest in Israel. Not only are we going to invest in Israel financially, but are also going to invest human capital in the future of the State of Israel.
Do you see this as something that could work beyond the University of Michigan?
EI: Absolutely. We have purposely created an extremely scalable model—TAMID Michigan is just the pilot site. Within the next year there will be a TAMID UPenn, TAMID Harvard, and TAMID Northwestern. Within the next five years, there will be a TAMID National Organization which will be setting up sites at top universities across the U.S., each site managing its own $1 Million portfolio of Israeli companies. We are talking about millions of dollars being invested in the Israeli economy and hundreds of students having sustained, substantive interaction with Israel in a way that has never been done before.
What’s the end game?
EI: TAMID will lead a paradigm shift by creating a new status quo where business students across the nation are active stakeholders in the economic growth of Israel. This organization will be a bridge between the passions, interests and aspirations of American business students and the Israeli economy which, until now, had been inaccessible to these students. As such, TAMID will realign the mismatch of personal and collective by engaging the personal and professional goals of American Jewish business students. TAMID has made Israel’s economic landscape accessible to the full time student by utilizing the tangible incentives of professional opportunities, experience and success.
We are building a massive network of business minded Jewish students and exposing them to Israel in an unprecedented way. Our vision is create a sustainable, highly interactive ecosystem of businessmen working in symbiotically with Israel’s economic landscape. We are thus opening direct access to a pipeline of the next generation of Jewish philanthropists and cultivating the next generation of investors in Israel.
Why invest in Israel/what makes Israel interesting as an investment destination?
EI: Israel has a flourishing economic landscape. Whether it is in high-tech, life sciences or consumer goods, Israel is pioneering a business culture of entrepreneurship and innovation. Our goal is to get people to recognize Israel beyond just a distant place to support through donations and activism.
How do motivated college students in Ann Arbor research small cap technology firms in the Middle East?
EI: Thanks to research vehicles, companies and organizations on the ground in Israel that we have partnered with, the research will be easy and engaging for the students. Additionally, the University of Michigan has a state of the art virtual investment lab with advanced research programs, which the executive board will be using during the educational phase and to assist in fund management.
Disclaimer: IsraelNewsletter is not affiliated with the TAMID Israel Investment Group and this interview should not be construed as an offer or a solicitation for TAMID.
