Stock Market
Stock MarketStocks: a bargain or a trap?

About a year ago, I was interviewed by the largest business media network in the United States.

The purpose of the interview was to discuss Israel’s accomplishments over the past 60 years.

During the interview, I focused on Israeli companies that are publicly traded in the United

States, as well as up-and-coming technologies that could potentially make a global impact over

the next two to four years.

Investment Destination

Over the last five years, Israel has become a very popular destination for foreign investors.

Global giants like General Electric, Microsoft, IBM and Johnson and Johnson are only a few

of the companies that have made large investments in Israel by buying local companies. In fact, Warren Buffet, perhaps the world’s most famous and successful investor, made his largest

non-U.S. investment when he purchased Iscar, an Israeli company, for $4.4 billion. Buffett has

since referred to the purchase as a “dream investment.”

Background

Why are foreign investors so interested in Israel? While Israel has none of the popular natural resources (such as oil or precious metals) that other emerging countries have, it boasts another, extremely important commodity – people. Its skilled workforce – which is highly motivated, resourceful and independent – enables Israel to stay ahead of the competition. The Israeli work

force has more engineers and scientists per capita than any other country in the world, and it

enjoys the highest per-population ratio of university degrees and academic publications.

Israel’s workforce is particularly competitive due to its exceptional ingenuity and entrepreneurial spirit. It has the world’s highest density of high-tech startups (4,000 in a country of 6 million

people). The combination of culture, skill and initiative creates a flexible working system that

allows for great adaptability while producing breakthrough technologies and quick time-to-

market solutions.

Military

Unfortunately, Israel is located amongst nations that aren’t particularly friendly. As a result,

however, a  great deal of money has been allocated to development of  cutting-edge defense technologies and over time Israelis have developed civilian applications for many of

them.

Many products used worldwide on a daily basis contain key Israeli intellectual property.

From voice mail to generic drugs, to cellular telephones and the firewall that sits on your

computer, the technological revolution of the past decades is, and continues to be, powered

by Israeli technology.

How to Capitalize

There are two main ways to invest in the Israeli economy and capitalize on this. The first is to work with a local bank or brokerage company and start investing in stocks, bonds, and mutual funds that focus on the local Tel-Aviv stock exchange (TASE). This exposes the investor to Israel’s strong economic growth and to one of the world’s best performing stock markets over the past four years (don’t forget, past performance is no guarantee of future returns).

Most of the companies that trade on the TASE are local banks, telecommunications companies, and the like. Therefore, this is actually an investment in the strong local Israeli economy.  It is not, however, where the main examples of Israel’s ingenuity lie. In fact, most of the creativity that Israel exports to the world is not represented on the local TASE

The other way is to purchase stocks in Israeli enterprises that trade abroad, most notably in the United States.  Israel has more companies trading on major U.S. exchanges than any other country in the world.



Many of the companies that are busy developing life-changing technologies are small firms and investing in them is not yet on anyone’s radar screen. One can also invest in the Israeli companies that are already known worldwide for their continuing ingenuity and creativity. 

Risk

These types of investments do carry an element of risk. As some of these companies are not very large, the smallest piece of news can send their stocks either soaring or tumbling. It’s therefore important to speak with your investment adviser to see how, if at all, investing in up-and-coming Israeli companies fits into your overall investment portfolio.  



Aaron Katsman is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. a registered broker dealer, Member FINRA, SIPC, MSRB, NFA, SIFMA. For more information, call (02) 624-0995 or email [email protected].