With a population of about 9 million, Israel has become one of the leading countries in vaccinating its residents against COVID-19. The country's Health Ministry provides updates on returning to normal. For instance, "gatherings are restricted to up to 20 people indoors and up to 100 people outdoors." As of late May, the country is expected to allow international tourists who have been vaccinated and meet certain criteria to visit the country.
Therefore, investors are likely to bet that domestic stocks could benefit from these positive developments. Furthermore, the country is highly regarded for its innovation and enterprising success. Legendary investor Warren Buffett has at times invested in a number of Israel-based health-care and technology businesses.
Recent research published by the University of California Institute on Global Conflict and Cooperation compares Israel with Singapore. It highlights:
“In both countries, technology is viewed to be a critical force multiplier when it comes to national security and defense… [Both countries boast] considerable industrialization, state-of-the-art high-technology sectors (companies, laboratories, universities, technology incubators), and highly educated work forces.”
We previously covered the ARK Israel Innovative Technology ETF (NYSE:IZRL), one of the funds managed by Cathie Wood, CEO and chief investment officer of ARK Investment Management. Today, we introduce two more thematic funds that focus on Israeli businesses.
1. BlueStar Israel Technology ETF
Current Price: $68.18
52-Week Range: $37.85 - $80.20
Dividend Yield: 0.63%
Expense Ratio: 0.75%
The BlueStar Israel Technology ETF (NYSE:ITEQ) provides exposure to Israeli companies listed on stock markets throughout the world, including the Tel Aviv, NASDAQ, NYSE, Hong Kong, London, Australian and Singapore exchanges. These firms mostly operate in the cyber security, autonomous driving, artificial intelligence, alternative energy, defense technology, health care and 3D printing sectors.
ITEQ, which has 60 holdings, follows the BlueStar Israel Global Technology Index™ (“BIGITech®”). Since its inception in November 2015 funds under management have reached $206 million. The top 10 stocks comprise more than 50% of the fund.
Among the leading names are Wix.com (NASDAQ:WIX), which provides a comprehensive website building platform; commercial-stage oncology group Novocure (NASDAQ:NVCR); Nice (NASDAQ:NICE), which provides enterprise software solutions that analyze multimedia content; freelancing platform Fiverr International (NYSE:FVRR); and SolarEdge Technologies (NASDAQ:SEDG), which offers inverter solutions for a solar photovoltaic systems and is becoming a diversified solar energy supplier.
Over the past year, ITEQ returned more than 78% and hit a record high in mid-February. Since then profit-taking has kicked in. Long-term investors could find value around these levels.
iShares MSCI Israel ETF
Current Price: $66.95
52-Week Range: $45.80 - $67.89
Dividend Yield: 0.16%
Expense Ratio: 0.59%
The iShares MSCI Israel ETF (NYSE:EIS) provides exposure to a wide range of Israeli stocks. The fund started trading in March 2008.
EIS, which tracks the returns of the MSCI Israel Capped Investable Market Index, currently has 96 holdings. The top 10 names make up close to 55% of net assets of $151 million. Wix.com; Nice; Check Point Software Technologies (NASDAQ:CHKP), which provides cyber security software and solutions; pharmaceutical group Teva Pharmaceutical Industries (NYSE:TEVA); Leumi (TASE:LUMI); and Bank Hapoalim (OTC:BKHYY) lead the names in the roster.
In there past 12 months, EIS is up about 44% and hit an all-time high in January. The fund’s trailing P/E and P/B ratios stand at 21.67 and 1.97, respectively. A potential decline toward $65 or below in the coming weeks would improve the margin of safety for potential long-term investors. We expect many of the names in the fund to create shareholder value in the coming quarters.