An interview with Abba Horwitz of Old School Partners was featured as part of our new subscription newsletter, Israel Opportunity Investor. You can find out more about the company and the opportunities we cover at www.israelnewsletter.com
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Tell us a little about yourself and your fund.
Abba Horwitz, Portfolio Manager: We started started Old School Partners in March of 1999. Since then, we’ve compounded a net return to investors of around 19%. We’re running the fund for the most part from Israel. With a junior partner, I’m managing roughly $60 million.
What’s your philosophy?
AH: We focus primarily on the small to midcap world. We apply a value approach. Basically, we’re looking for two things. We’re looking for value where there is a clear catalyst to unlock this value or cheap growth with value undiscovered, on the cusp of coming out. Unfortunately, I’m not a big commodity buff and have not been riding this current wave.
Can you give us a couple of examples of some successes you’ve had? (Continue »)
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.
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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.
