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Solid Risk/Reward Found Among Israeli Small Cap Stocks

Jul. 02, 2013 1:04 AM ETNVMI, SILC, WILC6 Comments
William Garrison profile picture
William Garrison

As the second quarter has come to a close, it's fun to look back and see where the market's biggest gains occurred. In the second quarter of 2013, Tesla Motors, Inc. (TSLA) was the standout large cap stock, rising 183% during the quarter. One other large cap stock made my list of 100% gainers during the quarter -- Fannie Mae (OTCQB:FNMA) advanced 104% to $1.41 and sports an equity market capitalization of $8.1 billion, as investors consider the firm's value amidst the ongoing housing and mortgage recovery. The rest of my list consists of stocks that started the quarter as small cap stocks, with market capitalizations under $2 billion. Congratulations if you managed to hold Q2 winners such as YRC Worldwide Inc. (YRCW), up 281% for the quarter, Canadian Solar (CSIQ), up 217%, or Clovis Oncology (CLVS) which advanced 134% during the second quarter. (Source: Yahoo Finance)

Unfortunately, I don't own any of the above-referenced second quarter winners. Broadly speaking, I don't have the risk-tolerance required for these types of securities. FNMA, YRCW, and CSIQ all have leveraged balance sheets, while TSLA and CLVS are both discounting significant future growth and long-term profitability in their businesses. I would be just as happy as the next investor to see a monster move in any one of my holdings, but I'm more comfortable trying to find stocks with strong downside protection and possible catalysts that will drive financial performance and higher stock valuations. I've highlighted two such ideas in recent articles (UFPT) and (RWC), and I also think there are a few compelling small cap stocks based in Israel that meet these criteria.

G. Willi Food: Very Little Downside and Significant Upside

First up is G. Willi-Food International Ltd. (WILC), a distributor of kosher food mostly in Israel, but also in Europe

This article was written by

William Garrison profile picture
Tenured investment professional with experience managing small cap portfolios. Managed +$500 million in mutual fund and institutional accounts. Long/short hedge fund experience as well. Skilled at developing unique insights, detailed Excel models, and discounted cash flow valuations.

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