- Israel ETFs are good momentum plays.
- The state of Israeli equities.
- A look at two Israel ETFs: EIS and ISRA.
By Todd Shriber & Tom Lydon
Since the start of 2013, several notable developed markets have taken turns being momentum plays. That roster would include the U.S., Japan and various members of the Eurozone.
Israel, the country most recently promoted to developed market status from emerging markets classification by index provider MSCI (that promotion occurred several years ago), is a legitimate momentum market in its own right.
Over the past 90 days, Israel is the best performing index, up 20.6%, and Turkey is the worst performing index, down -16.8%. That is a maximum/minimum range of 37.4%. Based on the composite rank, Italy is the hottest market in the world, followed by the U.S., South Africa, Israel, Canada and Spain.
The two Israel ETFs - iShares MSCI Israel Capped ETF (NYSEARCA:EIS) and Market Vectors Israel ETF (NYSEARCA:ISRA) - have been solid performers over the past 90 days. Although some global investors have been underweight Israeli equities due to the country's slight representation in major developed markets indices, they are missing out on a high-flying equity market.
Over the past three months, both EIS and ISRA are up more than 10% while the S&P 500 is up less than 6% and the iShares MSCI ACWI ETF (NASDAQ:ACWI) is up less than 5%.
The two ETFs have been benefited from Israel's accommodative monetary policy and health care exposure, among other catalysts. EIS and ISRA each feature health care as their second-largest second allocation at weights of 24.5% and 30.4%, respectively. Teva Pharmaceuticals (NYSE:TEVA) is the largest holding in both ETFs at weights of 23.8% in EIS and 14.4% in ISRA.
ISRA in particular has benefited from its 31% weight to technology stocks, a positive as Israel is home to one of the world's most thriving start-up markets, a catalyst that could lead to increased tech initial public offerings. Said Accuvest:
Currently, momentum investors should consider looking at single-country ETFs that invest in the U.S., South Africa, Israel, Canada, and Spain. With the exception of South Africa and Israel, the rest of the countries on this list are relatively expensive.
Market Vectors Israel ETF
(click to enlarge)