Your Investments: How to invest in Israel

For many investors, investing in local Israeli stocks is one alternative way of gaining exposure to the Israeli economy.

By AARON KATSMAN
April 17, 2014 03:53
3 minute read.
Tel Aviv Stock Exchange

Tel Aviv Stock Exchange TASE 311 (R). (photo credit: Gil Cohen Magen / Reuters)

 
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Israel is on fire and I am not talking about the weather.

Open a newspaper and you will see that another Israeli company has been purchased or has gone public. While much of the developed world is mired in economic quicksand, desperately trying to escape the global recession, but with anemic growth, Israel keeps chugging along. Growth estimates for 2014 are north of 3 percent. How many western economies can say that? Throw in a strong currency – maybe the best sign of overall economic strength – and the Israeli economy continues to push ahead nicely.

The very successful book Start-Up Nation: The Story of Israel’s Economic Miracle certainly made the case for why Israel has flourished, against all odds, economically. I can’t tell you how many emails and phone calls I have received from people who have read the book and are now all revved up to invest in Israel. The question I hear the most is, “How can I invest in Israel?”

Stay local?

For many investors, investing in local Israeli stocks is one alternative way of gaining exposure to the Israeli economy. If you want exposure to the strong domestic growth you could buy, for example, a local food company like Strauss or phone company like Bezeq. In order to do so you need to open up a local Israeli brokerage account, invest in shekels and speak in Hebrew to a local adviser. While this may be fine for some investors, for native-English speakers this is a big step.

Keep in mind that while Israel’s economy is strong there is a big world out there with many countries boasting both solid economic fundamentals and growth. A tour through Asian or Latin American emerging markets will find many countries with 3+% growth. Local food companies and telecommunication companies are a dime a dozen.

In addition not all in Israel is so rosy. Multiple tax hikes on corporations and individuals have been a huge drag on growth.

The local real estate market appears to be showing “bubble” like symptoms, and more government intervention will only exacerbate the problems.

Go global?


The real growth story is the ingenuity and creativity exported by Israel. Those excited after reading Start-Up Nation weren’t running to invest in a small company that invests in canned Israeli food. In fact, the Tel Aviv Stock Exchange has been underperforming major global indices for more than three years.


Rather they want to be part of all the ingenuity and creativity that Israel exports.

Investors want to invest in companies that power the world.

It’s no secret that the largest multinational companies in the world are very active in Israel. Whether it be Google, Johnson and Johnson, IBM or Facebook, or any of a multitude of other well know companies, they all come to Israel to acquire or invest in today’s cutting edge technologies. From companies that can put a camera in a pill to help alleviate the need for invasive gastric procedures (Given Imaging), to companies that lead the world in computer security (Checkpoint) to companies that are leading the move into cloud computing (Radware). What Israel does very well is power the world based on technology and that’s what becomes exciting as an investment.

The easiest way to access these companies is via the Israeli stocks that trade in the US. As has been widely reported, Israel has more companies trading on major US exchanges than any other country in the world except China. Not all Israeli companies are created equal and investors should do in-depth research before investing. 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.

Hag Sameah.

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.

aaron@lighthousecapital.co.il

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