Portfolio Reflections: 4 Stocks That Stand Out

Includes: ATTU, MLNX, RDWR
by: Shlomi Cohen

These are days for summing up. On Friday, we ended the first half of 2012, and also marked exactly five years since Apple (NASDAQ:AAPL) started to sell the first iPhone, on Friday, June 29, 2007. Today, we know that Samsung (OTC:SSNLF) immediately realized the power of the bomb that Steve Jobs dropped on the slumbering telephones market, and started to design iPhone lookalikes. By contrast, the company that led the market by a long way, Nokia (NYSE:NOK), thought that this was another of Steve Jobs's delusions of grandeur that would end in failure, and did nothing for over two years.

The result is that only Samsung stands today as a serious competitor to Apple. Nokia has collapsed to a market cap of $7.7 billion, less than the value at which Microsoft (NASDAQ:MSFT) bought Skype last year. All that is left for Nokia to do is to "go to church and pray"-- which is where they say Dov Moran sent them in 2008 because of his telephones. In retrospect, the recommendation was right, but because of the iPhone.

As far as the portfolio managed here is concerned, Apple's huge success leaves a bitter-sweet taste. Sweet, because I brought Apple into the portfolio at $88 in March 2007, in the period between the unveiling of the first iPhone by Jobs and its commercial launch. Bitter, because I believed that the only person who said to me then that the iPhone was a huge revolution, Dr. Eli Harari, founder and at that time CEO of SanDisk Corporation (Nasdaq:SNDK), would succeed in translating his correct reading of the market into a bonanza for his company, and that has yet to happen.

As the second half of 2012 begins, I am fairly certain that Harari's successor, Sanjay Mehrotra, has succeeded in getting SanDisk's solutions into one or more of the new products that Apple will shortly launch.

Mellanox nears $3 billion

Looking back over the first half year, in which Nasdaq rose 12.7%, four Israeli stocks in my portfolio stand out. Mellanox Technologies Ltd. (Nasdaq:MLNX) soared 118%; Attunity Inc. (ATTUF.OB) rose 83%; EZchip Semiconductor Ltd. (Nasdaq: EZCH) rose 41%, and Radware Ltd. (Nasdaq: RDWR) rose 31%.

Mellanox, which a year ago had been traded for a long time at a market cap of around $1 billion, is now approaching a market cap of $3 billion. This is because since early this year, its InfiniBand products have become the leading, almost unrivaled solutions for fast, low-latency connectivity in high-performance computing environments, storage centers for cloud computing, and dealing with Big Data.

For example, last week there were reports that, following the fiasco of the first day of trading in shares of Facebook (NASDAQ:FB), the U.S. Securities and Exchange Commission was about to require Nasdaq to upgrade its trading systems. In my view, that means more orders for Mellanox, whose products are already in the information systems infrastructures of other major bourses.

Cloud computing and Big Data are the new markets that have led to a late flowering for small, veteran company Attunity, and to a more than tenfold rise in its share price since its do or die rights issue three years ago. On its website, Attunity mentions giants Amazon (NASDAQ:AMZN), Salesforce, and EMC2 as technology partners, and these are new names for me. I presume that we will hear of deals with all three in the coming months, in addition to the giants with which Attunity has worked for many years, such as Microsoft (MSFT) and Oracle (NASDAQ:ORCL).

EZchip's momentum will continue

The momentum in EZchip can be expected to continue because of the acceleration in sales to Cisco (NASDAQ:CSCO), which recently launched its new ASR 5500 platform for the cellular network market which is thirsty for broader and more efficient bandwidth. The platform is driven by EZchip's fourth generation network processors, following on from the ASR 9000 family, which was upgraded on the basis of the same processors, and has been highly successful. In addition, EZchip's share price will rise because the moment is drawing near when it will unveil its "Kiryat Gat Project", the development of network processors for a new market at least as large as its existing one.

The fourth company, Radware, is the only one about which I can say without hesitation that it will not miss on results and guidance when it reports at the end of the month. Its load balancing products are selling well, including for cloud computing and virtual server environments. In addition, its OEM agreements with Juniper (NYSE:JNPR) and with IBM, and the great revival in demand for its advanced data security solutions, will yield strong results at least until the end of the year.

Published by Globes [online], Israel business news - www.globes-online.com - on July 2, 2012 © Copyright of Globes Publisher Itonut (1983) Ltd. 2012 Reprinted on Seeking Alpha with permission

Disclosure: No positions

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