This past Friday, my portfolio tracked at "Globes" made a bit of history - it reached a 100% cumulative return for the first time since it was launched in the beginning of 2001. Its annualized return is around 8%, compared with Nasdaq's negative 4% cumulative return, over that period.
Each time I neared this level in the past, and then fell back significantly, I regretted not having sold half the stocks in the portfolio and keeping the proceeds in cash. Now, I feel that I have several shares which can bring the portfolio to even higher levels in the next two years, even as I realize there will be corrections of varying degrees along the way.
Among the Israeli companies which contributed greatly to the portfolio's return, I note Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), which I added at the end of 2004. The share has shown that the classic "Buy and Hold" long term approach hasn't lost its luster, and Elbit can even be held until retirement because of the defense sector in which it operates, and because of good management.
Since 2004, Elbit's share price has more than tripled, and was a source of funds along the way when I sold part of the position several times.
Another big contributor, especially in the recent sprint, was EZchip. At the end of 2006, I added it to the portfolio, after I wrote here that the train is off and running, because its network processors made history when they were chosen by some of the biggest players in routers for the Internet infrastructure. Along the way, I sold half the position, at a big profit, because I felt that the train was traveling too fast for the potential at the time, when it was nearly completely dependant on Juniper (JNPR).
In the last quarter of 2009, I tripled my investment in EZchip, despite the fact that Juniper was going to drop it in a year and a half. I believed that a new customer, Cisco (CSCO), plus new processors, would more than make up for Juniper's departure. That is apparently also what was realized by big investors in the market in recent weeks, with the share up 55% since the beginning of February, despite the fact I know that employees sold about 1 million shares along the way.
Another company from Yokne'am that contributed quite a bit to return over the past year is Mellanox Technologies Ltd. (Nasdaq:MLNX), which I added to the portfolio during the worst of the crisis last year, and since then is up more than 130%. I do not intend to get out of that position because it is a technology engine which will benefit greatly from the era of cloud computing. Additionally, it has over $200 million in cash, which can be used to leverage acquisitions of companies or technologies that will raise its valuation a lot.
Like Elbit Systems, not only will Mellanox's industry continue to be attractive over many years, but its management is among the best there is today among public companies.
In recent weeks, slowly but surely the stocks added to the portfolio in the beginning of this year have been rising Radware Ltd. (Nasdaq: RDWR) , AudioCodes Ltd. (Nasdaq: AUDC; TASE: AUDC), and Allot Communications Ltd. (Nasdaq:ALLT). In my opinion, they will continue rising. Each one of them is in a niche in the telecommunications industry, where demand is expected to rise in parallel with the tremendous growth in video and voice traffic over the Internet.
Published by Globes [online], Israel business news - www.globes-online.com - on March 23, 2010
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