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This previously labeled emerging market is now the seventeenth most developed in the world. It has grown its GDP by 7% per year over the past 10 years, and has an unemployment rate of 6.6%.

In 2013, its GDP is projected to grow 3.8%, versus 2.5% in the United States. It spends more on education as a percentage of its budget than the U.S. (And gets results.) And its stock market has outperformed the S&P 500 by over 200 percentage points over the past 13 years.

Since January 1999, the S&P 500 has risen 19%. This country’s market has climbed 248%.

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Furthermore, the nation avoided the mortgage meltdown that affected dozens of other countries. Its central bank has been called one of the best-run in the world.

All this, despite a population of less than eight million – and being surrounded by enemies.

The country is Israel.

The Israeli economy is vibrant. Its energy, technology and healthcare industries are among the best in the world. It’s a hotbed of technological innovation. In fact, it has more startups per capita than any other nation. And here’s why.

As you probably know, Israel’s military intelligence is elite. The technology created to aid the Israeli Defense Forces is the stuff of science fiction. Flying robots the size of insects that capture audio and video and tanks with invisible shields around them are just a few. Not to mention the medical advances geared to save lives on the battlefield that translate to civilian patients.

But what you may not know is that one reason so much incredible technology comes out of the Israeli military is because the soldiers keep the patents on these inventions once they are no longer in active service. In other words, if a soldier invents a new chip used in communication devices by the army, when the soldier gets out, he or she takes the patent and can launch a startup to try to capitalize on this intellectual property.

Furthermore, there are Israeli intelligence units whose main focus is to invent new technologies, which the inventors can then take with them once released from duty. This creates an entrepreneurial culture that is second to none. As a result, Israel has more companies listed on the Nasdaq than any other besides the United States.

There are many Israeli companies with incredible technologies that are already publicly traded:

  • Check Point Software Technologies (NASDAQ:CHKP) – One of the leading computer security companies in the world. It was started by a former member of one of Israel’s elite intelligence units.
  • Given Imaging (GIVN) – Inventor of the pill cam, a camera encapsulated in a pill that is swallowed. Much more pleasant than a colonoscopy.
  • Nice Systems (NASDAQ:NICE) – Analyzes internet transaction data, to increase business performance, improve efficiency and stop financial crime.

You’d think that surrounded by enemies, Israel might be a scary place to invest. But that didn’t stop Warren Buffett from making his first investment outside the U.S. in 2006, right in the middle of a skirmish between Israel and Lebanon. At the time, Buffett’s Berkshire Hathaway (BRK-A) invested $4.5 billion into ISCAR Metalworking.

And as you saw from the chart above, Israel’s stock market crushed the results of the S&P over the long term. In 2013, Israel’s economy should get a further boost when production begins on the Tamar gas field, which holds nine trillion cubic feet of gas. The Leviathan gas field, which will start production in a few years, contains 16 trillion cubic feet.

With its emphasis on technology and health care, Israel is one of the key places I’m focusing on searching for great investment ideas. That’s why I’m so excited to be taking a small group of investors to Israel in late April, to scout out some of these small companies with breakthrough technologies. The idea is to find them before they become household names in the United States.

We already have meetings lined up with companies with technology that will revolutionize farming, cardiac care and how drugs are discovered and created. On our last day, we also have a very special meeting with the Deputy Governor of the Bank of Israel. This is the equivalent of meeting with Ben Bernanke’s number two, Janet Yellen.

Of course, in between company visits, we’ll also see the sights, such as the Church of the Holy Sepulcher in Jerusalem and ancient ruins in Caesarea. If you’re interested in learning more, click here or email Barb Perriello. If you’re unable to join us, be sure to check my column later in the year when I share some of the ideas I pick up while in the Holy Land.

Israel is the market’s best-kept secret. With robust energy, technology and healthcare industries, its economy, businesses and stocks should continue to outperform most of the rest of the world over the coming years.

Source: Don't Ignore This Emerged Market