Written by: Israel Investor Newsletter | July 10, 2008
June was a tough month for the market in general and Israel stocks were hit with a double whammy: tech stocks proved they were no longer immune to the weakening economy and the shekel continued its march higher versus the dollar.
Both EIS, the iShares MSCI Israel Capped Investable Market Index Fund, and the TAV, the NETS TA-25 Index Fund, were down about 3-4% with the overall Nasdaq down about 8%.
If you look closer at the chart, you’ll see that the TAV just recently outperformed the EIS. TEVA Pharmaceuticals (TEVA) was recently hit hard off of news of more imminent generic competition to Teva’s Copaxone (tables turned, eh?) in spite of some incrementally positive news on progress on a drug to treat Parkinsons.
We’ve written about the EIS’s extreme exposure to the generic pharma giant (weighing in at almost 25% of EIS) and this in turn, makes iShares’ Israel ETF more susceptible to fluctuations in TEVA’s stock price and ultimately, not as good a proxy for the entire Israeli market (of which TEVA constitutes less than 10% of market cap and which the TAV attempts to mimic).
Some additional reading:
Written by: Zack Miller | June 25, 2008
The entire interview with Dave Fry of ETF Digest part of our new subscription newsletter, Israel Opportunity Investor. You can find out more about the product and the opportunities we cover at www.israelnewsletter.com.
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How did you become a leading analyst on ETFs?
Dave Fry, Founder of ETF Digest: I think being early in coverage of these fast growing investment vehicles is the easy answer. Beyond that we have tried to be more honest and blunt in our coverage of new products. We haven’t been “yes men” or suck ups for issuers and sponsors for example. Where we’ve been critical some ETF sponsors won’t talk to us any more for example which isn’t a bother since we don’t use their products anyway. Further where there are problems we’ve been out front in pointing these out. That occurred with shorting problems for retail investors where the promised benefit didn’t meet reality. (Continue »)
Written by: Aaron Katsman | June 6, 2008
Aaron Katsman
IsraelNewsletter.com
Morgan Stanley (MS) just announced changes made to their MSCI Israel index. Among the changes was lowering weightings in hi-tech and insurance. Ok, nothing very unusual. They raised the index weighting on the banking sector. Again, nothing to write home about. It’s only when you look at the individual stock weightings that you may want to scratch your head. Teva Pharmaceuticals (TEVA) has a staggering 44.8% index weighting. My question to the folks at MSCI is, what’s the point? Why bother having an index which is essentially one company? After all Teva is about 9.5% of the local Tel-Aviv index.
For ETF investors this rebalance is important. Investors who have either purchased or are thinking about purchasing the iShares MSCI Israel index (EIS) had better be warned. They are in essence just buying Teva. They are certainly not getting any meaningful type of linkage to the local Israeli index. For investors looking for more diversified exposure, you may want to check out the new NETS TA 25 index fund (TAV) . In fact, fellow IOI colleague Zack “Billy Squier was underrated” Miller, had a real must-read, in-depth analysis of the differences in the 2 ETFs.
MSCI is often criticized for the same reason. They take the largest position in a particular index, and make it a very large chunk of the index they are trying to create. What’s the point? Shouldn’t a market index be a bit broader?
6/10/2008: An update on this post can be found here.
Disclosure: Author’s fund has a position in TEVA. He has no position in any other stock mentioned as of 6/6/08.
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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.
U.S. investors have tried for the past few years to access the growth in the Israeli market without a true index vehicle for doing so. The Amidex35 is probably the most accurate vehicle for those looking to get exposure to Israel as a whole. It’s an interesting index, splitting total market cap between Tel Aviv and the U.S (around 60/40). So, you get local Israel exposure with some growth-y tech companies layered in. Kudos
to Amidex’s Cliff Goldstein who shared some time with us on CNBC recently talking about Israeli companies and the market opportunity as a whole. We interviewed Cliff a couple of months ago and it’s worth reading that interview again here. (Continue »)
