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.

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Aaron Katsman
www.IsraelNewsletter.com

I would be remiss if I neglect to mention that tonight is my wife’s birthday. This post is serving me as a reminder that I still need to buy her a gift. Maybe I will get her a subscription the the IOI Premium Newsletter! With gold prices surging, I can’t afford to by her actual jewelry, but I can afford  to buy some shares in these 2 little-known Israeli stocks, and they are sure to be DIAMONDS in the rough.

Elbit Medical Imaging(EMITF) stock has dropped nearly 20% in the last few weeks. The real estate and bio-tech company was a big winner for investors in ‘07 and even with a slow start to ‘08, I look at ElbitMedical as a star performer this year as well. They are opening a mall in Poland( maybe I can get some cheap jewelry there) which is a continuation of their plans to continue building out the real estate holdings in Eastern European along with some new projects in India. As I have mentioned before, the real story with Elbit Medical is their very large stake in two of the most exciting private (though an IPO is definitely in the cards) companies Israel has to offer. Insightec ltd., develops a product that combines MRI technology with focused ultrasound in order to treat serious diseases such as bone, liver and brain tumors, without the invasive procedures that are currently used.  The other private company is Gamida Cell. Gamida Cell is developing, along with the aforementioned Teva,  a line of cell therapy products for the treatment of such diseases as leukemia and lymphoma. 

Jacada(JCDA) a leading provider of unified desktop and process optimization solutions for customer service operations, has been signing deals right and left and a few weeks ago announced that they were selling their Application Modernization Business to Software AGfor $26 million. They are doing this to solely focus on high growth business, to position Jacada as a pureplay in the call center solutions business. The firm provides a single, unified workspace for customer service organizations managing lots of legacy and disparate software systems. My buddy Zack”I love the Internet” Miller had a great analysisof this deal. I really think Jacada is poised to fly, and in fact with all the current selling on Wall Street, Jacada stock has actually been inching up.

Happy birthday!

Disclosure: Author’s fund holds a position in EMITF and JCDA. He has no position in any other stock mentioned as of 1/9/08.

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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Zack Miller
IsraelNewsletter.com

As my colleague, Aaron Katsman, opined on these pages just a few months ago, Israel would not be immune to the subprime mess that began in the U.S., and through complicated collateralization, spread throughout the world. At the time, news spread quickly in Israel that a leading developer, Heftziba, was becoming insolvent and that its onerous debt of $400M (large in relative terms) quickly sacked any chance of paying back investors, banks that financed the company, and lastly, homeowners who purchased properties through Heftziba.

Well, Aaron’s prediction was spot on. Haaretz reported today that one of Israel’s largest banks, Bank Hapoalim, is suffering from the US mortgage malaise as well. Says Haaretz:

Hapoalim has a bond portfolio with American mortgage-backed securities valued at about $3.5 billion. So far the crisis has cost the bank $120 million. For the second quarter, Hapoalim had reported only a $35 million loss, but in an immediate announcement to the stock market yesterday evening in response to a demand from the Israel Securities Authority (ISA), the bank said that figure was now much higher.

Hapoalim claims that these bonds are only AAA government-type bonds but hasn’t been fully forthright about what they have on the books.  Bank Discount, another large Israeli bank, apparently has some significant exposure.

Look for more banks to follow-suit as over the past few years, many of the Israeli banks and financial institutions were buying large swaths of assets overseas, including in real estate-related exposure.

Investors in the US see how painful having invested alongside poor risk managers, let’s hope (and pray!) that Israeli risk managers have acted more prudently.

Disclosure: Author’s fund has no position in any stock mentioned as of 11/09/2007.

Please see our Disclaimer HERE.

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Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC. and a former equity analyst for a leading multinational hedge fund. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email zack@profile-financial.com

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