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The market gained last week after Wall Street suddenly realized that nothing is going to happen over the next two years. This is because the Democrats, who have just won control of the U.S. Congress, will scupper any initiative President George W. Bush tries to move forward during the last two years of his term of office.

Wall Street hates changes just as much as it hates uncertainty. Notice how an excellent company like Teva Pharmaceutical Industries Ltd. (NYSE:TEVA) is continuing to fall because of the change in leadership and the uncertainty about 2007. Teva’s excellence was no match for these factors.

Since economic forces will eventually gain the upper hand at Teva, I continue to consider it a buying opportunity at current prices. Right now, people are selling the stock on impulse. But between last Tuesday's fall in stock price, Monday’s decision by Teva on a share buyback, and the reasonable possibility that outgoing CEO Israel Makov is wrong (and he has good reason to hope that 2007 will not be as good as 2006), Teva’s current price is the most economic ever in the 19 years that I have been following it.

Such eccentricity is not uncommon on Wall Street. AudioCodes (NASDAQ:AUDC) and Tower Semiconductor (NASDAQ:TSEM), for example, were harshly punished for posting improved results. That’s how it goes.

Elron Electronic Industries (ELRN) is a leading Israeli company that offers diversification of risks and a phenomenal range of opportunities. Buying Elron shares at current prices gives the buyer access to a number of promising fields. What’s more, a person investing in any of those fields will have a stake in a number of companies that stand a good chance of becoming leaders.

In other words, the investor is buying into dozens of potential exits at a huge discount. This was what lay behind the tender offer announced two weeks ago by Discount Investment Corporation (DISI) for more than four million Elron shares at $12 each. This buyout will increase Discount Investment's holdings in Elron to 63% from 48%; in other words, it will give it full control.

The capital market often witnesses strange events that provide investors with opportunities to pick up something dead cheap. Elron is one such example. I have written in the past about the fall in Given Imaging (GIVN), of which Elron owns 21% (after increasing its holdings by 2% at the beginning of 2006).

When Given Imaging plummeted 42% from the beginning of May through mid-July, I said that it was an overreaction and even stated for the record that I had purchased Given Imaging shares. I won’t go into the reasons for the prolonged fall, such as the sacking of the company's founder and CEO, and the “analysts’ ruling” that Given Imaging had run aground and that its pill cam for the small intestine had exhausted the company's capabilities. Since then, Given Imaging has moved forward with the unveiling of its endoscope capsule (the colon capsule that everyone has been waiting for), which has already been endorsed by health authorities in both the U.S. and elsewhere.

In Japan, where the company has had great difficulty securing endorsement for its capsules from local health trusts, a breakthrough appears to have been made in the diagnostic field, which will enable Japanese health trusts and insurance companies to reimburse the cost of Given Imaging’s capsules. Accordingly, doctors and patients in Japan will now be given approval, which had been previously been withheld for non-medical reasons, to use them.

The approval of reimbursement in Japan guarantees per-capita sales that will be much larger than anywhere else worldwide, even the U.S. Having cut their ratings to “Hold” as early as last year, the analysts are all beginning to realize what kind of company Given Imaging is. There was never any crisis. What took place was a natural hiatus at a smart medical device company on its way to the top. If you look at the track the stock has taken since it dropped to $14 on July 18, you will find that around that time, a number of experts had, in fact, discovered the chasm between the price of the company on Wall Street and its value on Main Street.

At the end of July, Steven Bulwa, an independent portfolio manager based in Toronto, singled out two technology companies with tremendous potential. Once was Dutch company Crucell NV (NASDAQ:CRXL), which specializes in vaccine and antibody development. Crucell fell by 43% at the same time that Given Imaging lost 42%. Like Given Imaging, it too was dumped by the analysts under the excuse that “it was no longer relevant.” Writing in the Real Money column in online news site thestreet.com, Bulwa said that Given Imaging’s stock “has been a bit of a disaster lately, but it seems to have stabilized after the most recent earnings announcement in July, and the company's prospects remain attractive.”

Neither the company’s small intestine pill cam, which is already on the market, nor the PillCam colon, which is due for release in 2007, were included in this review. Anyone who misses the breakthrough that Given Imaging has made here (aside from ideas for medical diagnostic products that sell) has failed to realize the full extent of its achievement and the scope of its potential. The investor in Elron will get Given Imaging at its exact current value, plus another 24 companies. I could write long and convincing articles about 23 of them, and why it would be worthwhile investing in every single one.

Take a company like Medingo Ltd., a company jointly owned by Elron and Rafael Armament Development Authority Ltd. development company RDC. Medingo Ltd. has developed a miniature plaster the size of a postage stamp that is affixed to the body (like the nicotine patch for cigarette smokers) and delivers insulin more effectively than an insulin pump. Among the array of global medical device giants that have invested in Medingo are Medtronic Inc. (NYSE:MDT), Johnson & Johnson (NYSE:JNJ), Hoffman LaRoche, and Abbott Laboratories (NYSE:ABT). The company expects to obtain U.S. Food and Drug Administration [FDA] approval for its product in January, with initial sales to begin in Q3 2007. Just think how much you would have to pay to join Medingo’s current investors. Through Elron, you would get in for free.

Do the names Wavion or Teladata Networks ring a bell? The latter recently appointed Zvi Slonimski, founder of Alvarion, as its CEO. I have repeatedly talked about the importance of investing in water solutions and Elron is active in this field too with a 32% stake in Atlantium, which was founded in 2003 in Beit Shemesh and develops and markets water disinfection solutions. Altantium’s controlling shareholder is Aurum Ventures MKI, a holding company run by Morris Khan, the “inventor” of Amdocs (NASDAQ:DOX), and a few other inventions that we can only dream about.

Two more Elron companies that I have mentioned on previous occasions are Galil Medical, which has developed an innovative cryotherapy system for the treatment of various cancers, and which has had its first sales; and Advanced Metal Technologies, which develops and markets amorphous metals with non-crystalline structures. Experts claim these technologies will be used in future to heat homes and offices, and they are already in use in some places. Has anyone worked out the potential in NetVision Ltd. following the merger with Barak 013? Elron certainly has. It holds 38% of Netvision.

ELRN 1-year chart:

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.

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