Written by: Zack Miller | July 15, 2008
Has the massive shekel run finally come to an end? Deutsche Bank thinks so. Globes reports today that DB analysts think that the recently-announced 4-fold increase of dollar purchases (up to $100 million/day) by the Bank of Israel may be the proverbial top for the Israeli shekel, which has enjoyed a huge run against most of the world’s top currencies over the past couple of years. We’ve written voluminously on the shekel’s rise that’s even prompted certain Israeli hi-tech firms to offshore engineering work to the U.S. Globes also recently reported that wages of senior Israeli high tech managers are beginning to come under pressure.
With gas station managers in the U.S. rumaging through storage units due to a shortage of ‘4’s’ to display on their pumps, I wonder if Israeli gas station managers are having the same problem with ‘8’s’? Brutal.
The large multinational tech firms (and now consumer products firms) continue to use Israel as a R&D hub. Interesting historical view/story of Sun Microsystems Israel here. It’s part of a larger series done by Ayelet Noff on Israeli High Tech. Om Malik also shared his thoughts on a recent trip to Israel for the Israel 2008 conference here. VC Cafe’s Eze Vidra has a good article about Israeli firms receiving funding but fighting for survival here.
Tel Aviv Stock Exchange mulls change in market hours here.
Tell us a bit about yourself.
Eze Vidra, VCCafe.com: I’m originally from Argentina. My parents moved to Israel with me in 1987 when I was just a kid. I grew up in Israel and did my army service. I moved to the US about 4 years ago. I’ve now been in Northern California for over a year. In 2003 I cofounded a firm that enabled text input solutions for PDAs ad mobile devices. At the time, it was almost impossible for Israeli companies to raise money. During the fund raising process, I met a CEO with a firm that eventually offered me a position on the spot. That firm was Gerson Lehrman Group, the hedge fund research firm. I started in IT as a project manager and grew into a position where I was managing the integration of business requirements and IT products. (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.
As Israel turns 60 this week, here are a quick few economic stats on the State of Israel:
- Forecast GDP growth in 2008 recently cut to 3.2%. 2007 GDP was 5.3%.
- 7.2 million citizens, per capita income reached about $21,000 in 2007
- In a recent study the IVC Research Center eports that the capital available for investment in the hands of Israeli VCs is now at $2 billion, making conditions ripe for the number of investments we’ve seen in the past couple of weeks. In 2007, Israeli venture capital funds raised a total of $1.1 billion (including venture lending), 21% more than in 2006.
- The Central Bureau of Statistics announced last week that Israel’s unemployment fell to a seasonally adjusted 6.7% in Q4/07, compared with 7.2% in the preceding quarter and 7.8% in Q4/06. This is the lowest rate of unemployment in Israel since the early 1990s and the first time it has fallen below the 7% level
- Spending by foreign tourists in Israel totaled US$2.4 billion last year, 16.5% more than in 2006. (Central Bureau of Statistics)
- Berkshire Hathaway Inc. Chairman Warren Buffett said on Saturday that the company’s acquisition last year of the Israeli firm Iscar has worked out better than expected. Buffett said that he had very high expectations when Berkshire struck the deal, and that the metal-cutting-tool maker has “exceeded that in every way.” “It’s been a dream acquisition,” he said.
- Israel has more companies traded on Nasdaq than any other country other than US. Here is a list of Israeli stocks traded in the U.S.
Zack Miller is Managing Editor of Israel Opportunity Investor, the only subscription newsletter focused on opportunities in Israeli stocks.
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.
