Israeli stocks have been in the news lately with the recent blockbuster earnings report from Mellanox Technologies Ltd. (MLNX), as well as earnings and other news releases from Check Point Software Technology Corp. (CHKP), Protalix BioTherapeutics (PLX) and Internet Gold - Golden Lines Ltd. (IGLD).
While recent performance among many leading Israeli stocks has been mediocre, as represented by the MSCI Israel Capped Investable Market Index Fund (EIS), the Israeli economy is among the most dynamic outside of the major world economies, particularly in the medical and technology sectors. Furthermore, with a population of just under 8 million people, it most likely in my estimate contains among the highest concentrations of world-class companies per capita, with over 60 of these listed on the major U.S. exchanges.
In this article, via an analysis based on the latest available Q4 institutional 13-F filings, we identify the Israeli companies that are being accumulated and those being distributed by the world's largest fund managers, managing between $50 billion and over $700 billion in 13-F assets. Taken together these mega fund managers control over 35% of the assets invested in the U.S. equity markets, but number just over 30 out of the tens of thousands of funds that invest in the U.S. equity markets. Also, taken together, they are bullish on the group, adding a net $575 million in Q4 to their $12.48 billion prior quarter position (for more general information on these mega funds, please look at the end of the article).
The following are Israeli companies that these mega fund managers are most bullish about, and that are also trading at a discount to the peers in their group (see Table):
Teva Pharmaceutical (TEVA): TEVA is an Israeli developer of generic and branded drugs and active pharmaceutical ingredients. Mega funds together added a net $234 million in Q4 to their $7.77 billion prior quarter position in the company, and taken together mega funds hold 20.0% of the outstanding shares. The top buyers were TIAA-CREF, the leading provider of retirement financial services for people working in the academic, research, medical and cultural fields ($166 million) and Los Angeles-based mega fund Capital Research Global Investors, with over $223 billion in 13-F assets ($146 million), and the top holders were mega fund Wellington Management, with $254 billion in 13-F assets ($1.87 billion) and Capital Research Global Investors ($1.36 billion).
The company is a consistent growth performer, with earnings up strongly almost every year recently, including through the 2008/09 recession, and they are projected to continue increasing at a healthy 10.3% from $4.97 in 2011 to $6.05 in 2012. TEVA's generics business is expected to benefit greatly from the woes of big pharmaceuticals that are expected to lose patent exclusivity on a number of big drugs. Its shares currently trade at 7-8 forward P/E and 1.8 P/B compared to averages of 12.8 and 3.1 for its peers in the generic drug manufacturing group.
Check Point Software Technology: CHKP is an Israeli provider of internet security software, hardware and services. Mega funds together added a net $216 million in Q4 to their $3.24 billion prior quarter position in the company, and taken together mega funds hold 26.0% of the outstanding shares. The top buyer was Wells Fargo & Co., with $137 billion in 13-F assets ($112 million), and the top holder was Fidelity Investments ($1.43 billion).
CHKP released its Q1 earlier Monday, reporting revenues in-line and beating analyst earnings estimates (74c v/s 72c); its shares are down about 10% mid-day and trading at 16-17 forward P/E and 4.3 P/B compared to averages of 48.5 and 4.8 for its peers in the computer software group.
The following are some additional Israeli stocks that mega funds bought in Q4 (see Table):
- Mellanox Technologies Ltd. , a fabless semiconductor company that provides interconnect products for computing, storage, and communications applications in the computing, Web 2.0, storage, financial services, database, and cloud markets, in which mega funds together added a net $72 million in Q4 to their $612 million prior quarter position in the company;
- Nice Systems Ltd. (NICE), an Israeli provider of intent-based enterprise customer interaction solutions that capture and analyze interactions and transactions, realize intent, and extract and leverage insights to deliver impact, in which mega funds together added a net $33 million in Q4 to their $138 million prior quarter position in the company;
- EZchip Semiconductor Ltd. (EZCH), an Israeli fabless semiconductor company that provides Ethernet network processor chips for high-speed networking switches and routers, in which mega funds together added a net $16 million in Q4 to their $60 million prior quarter position in the company; and
- Allot Communications Ltd. (ALLT), an Israeli leading provider of network optimization products for service providers to manage network traffic and internet access, in which mega funds together added a net $14 million in Q4 to their $32 million prior quarter position in the company.
Besides these, mega funds based on their Q4 trading activity indicated that they are bearish on the following Israeli stocks (see Table):
- SodaStream International Ltd. (SODA), an Israeli manufacturer of home beverage carbonation systems, which transforms tap water into soft drinks and sparkling water, in which mega funds together cut a net $22 million in Q4 from their $188 million prior quarter position in the company;
- Protalix Biotherapeutics , an Israeli developer of recombinant proteins indicated for various disorders using plant cell-based expression technology, in which mega funds together cut a net $6 million in Q4 from their $26 million prior quarter position in the company; and
- Cellcom Israel Ltd. (CEL), a leading provider of cellular communications in Israel, including basic and advanced cellular telephone services, text and multimedia messaging services, and advanced cellular content and data services, in which mega funds together cut a net $5 million in Q4 from their $83 million prior quarter position in the company.
Note to Table: The companies selected to be included in both the Top Buys and Sells and Top Holdings categories in the Table were picked on both an absolute basis, i.e. the highest dollar amounts of buys and/or sells, as well as those amounts relative to their market-cap. That way, the list is not biased towards the largest companies in the group.
Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.
Disclosure: I am long MLNX.