Aaron Katsman
www.IsraelNewsletter.com

April’s Israeli CPI rose a much more than expected, 1.5% leading most analysts to predict that the Bank of Israel will raise interest rates by at least 0.5% at the end of the month. The inflation jump for April was the highest since 2002, and inflation over the last 12 is at 4.7%. IOIactually wrote about surging Israeli inflation some time back. The question for investors is how to play the rising inflation game?

I think that we will see a rotation out of local Tel-Aviv Stock Exchange stocks into Israeli stocks that trade abroad. Why? Because most of the large, locally listed companies are a play on the local consumption game. Keep in mind that Israel had been experiencing 5+% growth for the last three years. With surging inflation, and interest rates set to rise sharply, the local Israeli consumer is undoubtedly going to take it on the chin. All you have to do is walk into a local supermarket and you see how prices have risen. Tomato prices have almost doubled in the last few months, chicken, bread, other fruits and vegatable have all seen sharp price rises as well. The local consumer is sure to cut back spending, making local consumption stocks, not a particularly attractive place to park your money.

So what to do? As I said, I think we are at the early stages of a rotation into the Israeli companies that do most of their business outside of Israel. Hi-tech companies for the most part. We have seen a recent out-performance in these companies, and many have also produced stellar earnings reports. Companies like Given Imaging (GIVN), Syneron (ELOS) and Pointer Telocation(PNTR) have all blown past earnings estimates over the last few days.

If you are looking to invest in Israel, it may pay to take a long look at the Israeli stocks that trade in the US, as they appear set to outperform.

Disclosure: Author’s fund has a position in GIVN,ELOS, and PNTR. He has no position in any stock mentioned as of 5/16/08.

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.

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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.

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.

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Aaron Katsman
www.IsraelNewsletter.com

At IOI we are not in the business of making fun of analysts who actually take a stand before an earnings report and tell investors what they think, even if they are wrong. In fact we applaud the move. It’s not very helpful to upgrade or downgrade a stock after earnings when the stock has already moved one way or another. Was it helpful to know that Google (GOOG) was upgraded this past Friday morning after the company blew past earnings and was up $70 in pre-market trading. Investors want information that they can use, before a difference making event happens to a company.

Last night the Israeli  hi-tech company Zoran (ZRAN) ,which makes chips for DVD players and multimedia systems, came out with numbers and provided a much rosier outlook than analysts had predicted. Ten days ago a Jefferies and Co.analyst downgraded Zoran stock down to ‘undeperform’, and slashed his numbers for the rest of the year as well.

Zoran predicted revenue of between $130 million and $135 million in the 2nd quarter, ahead of the $127.1 million that was the consensus. The company also said that they expect that margins for DTV and mobile phones will improve for the rest of the year.

IOI recently laid out the case for Zoran. Our subscribers would have known what the catalysts are going forward. With that being said, I still want to commend the Jefferies analyst for taking a position. He may have been wrong, we all are from time to time I am told, but at least he was proactive.

Disclosure: Author’s fund has a position in ZRAN, fund has no position in any other stock mentioned as of 4/22/08.

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.

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Aaron Katsman
www.IsraelNewsletter.com

IOI has mentionednumerous times about the intriguing potential buying opportunity presented in Comverse Technology (CMVT.pk). The huge cash position along with large positions in publicly traded Verint Systems (VRNT.pk) - the jewel of the group- and Ulticom (ULCM.pk), have made Comverse one of our favorite Israeli plays. We have mentionedthat we thought the the company will sell-off their holdings and it appears that this strategy is starting to take place.

Yesterday, the Israeli financial daily Globes reported that Ulticom has retained investment bank Jefferies and Co. to review strategic alternatives. The article also quoted  Comverse president and CEO Andre Dahan, “This is the first stage of my strategy. Businesses that are not synergetic with our business can be sold. Although we emphasized in the announcement that there is no deal yet, and that Ulticom’s board might not approve any deal, but this is definitely a step towards the sale of the company.”

Previously we have mentioned that a potential breakup value of Comverse could be worth around the $30 level. Investorslooking for an interesting value play, may want to take a long look at Comverse as it appears that the breakup strategy is about to begin.

Disclosure: Author’s fund has a position in CMVT.pk,VRNT.pk and ULCM.pk, fund has no position in any other stock mentioned as of 4/18/08.

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.

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