Ori is a global value investor, and he thinks it’s critical to research the country as much as the company. Great individual companies can be crushed by a bad geopolitical situation. You have to like the country as well as the company.
Objective criteria — why is Israel a great place to invest?
Stable, capitalist, pro-business, pro-investors, free market democracy. It’s the only true democracy in the region, with investor protection equal to the US (and Canada and Columbia and Ireland, etc.) and strong property rights and law. Foreign investors are appreciated and valued as partners.
Healthy and growing economy. Israel had a minimal impact from the 2008 crisis, has the strongest GDP growth of developed companies since the crisis. Low unemployment, improving credit rating, debt has declined as a percent of GDP since 2007.
Human capital and innovation. More start-ups than any country except the U.S., more Nobel prizes per capita than any other country, high rate of entrepreneurship, heavy R&D and research expense that exceeds all other countries.
Natural resource discoveries. Bonus is the big offshore gas discoveries that will bring eventual energy independence (Leviathan and Tamar, which we’ve talked bout before when Noble was being teased for their Cyprus exposure).
There are lots of companies — 600 companies on Tel Aviv exchange, more Nasdaq listed stocks than any other foreign country. Plenty of opportunity for investors.
The Tel Aviv 100 index has been flat since early 2010. So business has been going well, but the stocks are cheap.
He says that “Investing in Israel is like investing in the US, only cheaper.”
How to do it?
Buy basket of high quality stocks like the Index funds. Or some of the high quality stocks, banks, insurance, real estate.
But his specific idea is a company called Hilan Tech, which he says is the “ADP of Israel.” Great performance and dividends over the last decade. Like ADP, they do payroll processing and related HR and IT services. Ticker in Tel-Aviv is HLAN, ticker on the pink sheets is HLTEF.
It has low CAPEX, slow growth, very high customer switching costs, and it’s a cash cow. They have 25% market share, but probably more like 50%+ of their addressable market (they don’t go after the very small businesses). They pay a high dividend, 75% of net income for a 7% current dividend yield.
...