Why I'm Selling Verint, Doubling Up on Orbotech

by: Shlomi Cohen

When my portfolio tracked by "Globes" returns 71% (inception of January 1st, 2001 to date), while Nasdaq returns negative nearly 13%, it’s a signal, to me, to begin bringing profits home and building a cash position ahead of the profit taking which is bound to occur sooner or later.

In line with that, I am selling one of my riskiest investments of this year, Verint Systems Inc. (Pink Sheets: VRNT). Verint yielded a four month return of 97%.

It was a risky investment, since the company, a subsidiary of Comverse Technology Inc. (Pink Sheets: CMVT), hasn't produced financial reports for several years, and according to Comverse's commitment to the US Securities and Exchange Commission (SEC), that period of uncertainty will end in the next few weeks, or by February 2010 at the latest.

As I wrote when I added Verint to the portfolio, in my opinion, Verint's operations have not been hurt in the crisis, in contrast to many other technology companies. For example, in the monitoring field, orders continued to stream in from its large customers, who are government institutions. Apparently this niche even grew during the crisis, since as it is known, over recent years there has been major growth in secure locations around the world.

I attribute most of the share's rise to rumors which have increased recently, that rival NICE Systems Ltd. (Nasdaq: NICE; TASE: NICE) will merge with Verint, after Verint reports all past financials. The estimations are that Nice's new CEO, Zeevi Bregman, will push for the merger, since he knows Verint's potential well, having worked for many years as a senior Comverse executive.

So Verint is being taken out of the portfolio not because of something negative, but because of a feeling that profits as great as these should be taken before everyone else realizes the good news, because maybe later on it will be crowded at the exit for a thinly traded share.

With part of the money I get from the sale, I will double my investment in Orbotech Ltd. (Nasdaq: ORBK), because in my opinion the market has not yet realized the wave of investments that are going to take place over the next two years in China, and in Asia in general, in new production lines for LCD screens.

While the wave of price rises in the television screen market has perhaps passed, and while there may be a slight drop in the current quarter, the drop will not affect the many investment decisions which were made by manufacturers in recent months. Analysts estimate that today there is no inventory problem in the screen industry, after China recorded strong sales in the recent holiday season at the beginning of October. In the US, there is a strong awakening ahead of the opening of football season. In general, there are estimates that LDC screens will be the hit of the Christmas shopping season, which begins in about a month.