Adding Orbotech on Close Inspection

This week I am adding Orbotech Ltd. (Nasdaq: ORBK) to my portfolio tracked by "Globes". I am paying for it with funds from selling half the portfolio's stake in ClickSoftware Technologies Ltd. (Nasdaq: CKSW), which has yielded a very nice 93% return in two and a quarter years.

It may very well be that on Wednesday, when ClickSoftware announces its results, I will cry over the sale, but I prefer the approach of CNBC's Jim Cramer, who always urges his viewers to take profits off the table, because eventually "pigs get slaughtered".

Today, Orbotech is a world leader in the market for inspection systems for LCD screens and printed circuit boards. The screens are the type used for Amazon's (AMZN) Kindle, screens for mobile phones such as the iPhone, and computer monitors of all types and sizes. But the biggest market is for inspecting TV screens, from 32 inches up to the "monster" 108-inch screen made by Sharp (SHCAY.PK), a large Japanese customer of Orbotech's, who believes that there are buyers for TV screens which cost around $150,000.

I will soon elaborate on Orbotech's business, but in the meantime I will point out that it is on the verge of a recovery, because its target markets have awakened significantly, especially in June.

Oscar Gruss analyst Ziv Tal raised his recommendation on the stock to "Buy" already in May, and two weeks ago raised his target price for the share to $11 from $7. I received the final push to add the stock to the portfolio from the massive investment of $12 million that Drs. Kobi and Judith Richter made, since it is not every day that you see parties at interest investing a sum like this.

The Richters did not buy 1.2 million shares during the course of trading on July 7, since only 39,000 shares were sold that day, and the question can be asked, from whom the share package was bought, since until today the seller has not been identified.

I believe that the shares were bought from the heirs of Bill Davidson, a billionaire and noted philanthropist, who passed away four months ago. Among his holdings were 2.2 million shares of Orbotech. If I am correct, then there will be a report, as required by law, by August 10th. Kobi Richter is the brother of Yochai Richter, who founded Orbot in the 1980's and merged it with Optrotech, which became Orbotech. Today he is executive chairman, and was CEO until three years ago.

It was one of the most successful mergers in Israeli high-tech, and I remember the great ego battles between the founders of the two companies before the merger, battles which held them up for a long while. The one who in the end "turned the table" on the founders and forced them to compromise and pull off the deal was Uzia Galil, one of the founding fathers of Israeli high-tech. He was then the chairman of Optrotech, and until today remains a director at Orbotech. A man like him was needed several years ago to bring about the merger of NICE Systems Ltd. (Nasdaq: NICE) and Verint Systems Inc. (VRNT.PK). A merger of those two firms, like Orbotech, would have contributed a lot to both companies.

Published originally by Globes [online], Israel business news - www.globes.co.il

© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.