Playing Israeli Stocks Given the Egyptian Political Situation

Includes: EIS, ESLT, ISL
by: Scott Rothbort

Israeli stocks were rattled in trading on Sunday (the first trading day since Thursday) by the goings on in Egypt. The Tel-Aviv 100 Index (TA-100) slumped 3.86% on Sunday. On Monday, the TA-100 managed to close higher by 0.91% during that session session.

Believe it or not, Israeli-Egyptian relations are quite strong-- on a relative basis to its other neighbors-- ever since the Camp David Accords were formed in 1978 and the peace treaty was executed in 1979. Of course, as a precaution, Israeli citizens doing business in Egypt have left the country.

The concern now is that a new government in power in Egypt with Muslim Brotherhood as part of a coalition would seek to reject the Camp David agreement. I think that this is not likely, but nevertheless is one of those Egyptian worries out there.

There is one Israeli stock getting a sympathetic bid from the event in Egypt. That stock is Elbit Systems (NASDAQ:ESLT), which has traded poorly in the past year. Elbit Systems is a Haifa, Israel based defense systems and communications contractor. Maybe the tumult in Egypt will put some energy back into ESLT shares.

Otherwise, you have an opportunity to buy the Aberdeen Israel Fund (NYSEMKT:ISL) at an even bigger discount to NAV than last week, which was then about 12%. Alternatively, the iShares MSCI Israel Capped Investible Market Index ETF (NYSEARCA:EIS) just got cheaper thanks to the situation in Egypt.

Disclosure: At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long EIS and ISL stock --- although positions can change at any time.