"Globes" continues with its weekly feature outlining the investment portfolio recommended by various investment managers operating in the capital market.
"Globes" weekly recommendation, we would remind our readers, is intended for private investors, rather than companies or organisations, seeking an investment for the short term (a few months), the medium term (about a year) or the long term (upward of three years).
Our experts, all of them seasoned capital market investment managers, have been asked to construct a recommended investment portfolio for each of those three terms, giving detailed reasons. We have imposed no restrictions, recommendations need not even be limited to the capital market, and experts are entirely free to structure the portfolios as they deem best.
Bloch - Rothstein's recommendation
|
Investment
Channel |
Solid
Investor |
Ordinary
Investor |
Speculative
Investor |
|---|
| Shachar debentures |
90% |
50% |
0% |
| Karam |
5% |
30% |
80% |
| Overseas |
5% |
20% |
20% |
"What would you do with NIS 100,000?" is this column's leading question. Recommendations, however, are obviously valid for any investment amount, from NIS 10,000 to NIS 1,000,000.
Diverging sharply from the relative solidity of the banks (Bank Leumi last week and Bank Hapoalim next week), our investment column this week plunges straight into the seething lava of the capital market’s aggressive portfolio managers. Just how hotly this lava is seething, is clearly indicated by the authors of this week’s recommendations.
Bloch-Rothstein is one of the biggest, but not the only, portfolio management company in the Haifa area. It made the headlines a few years ago, when the Batucha company waged a battle against Gideon Bloch and Arik Rothstein. The two men left the local Batucha branch to set up their company.
The solid investor - shekel channels
Arik Rothstein, who wrote this column, is optimistic about the capital market in general and the share market in particular. The factors to be taken into consideration are:
- The slowdown in the economy and the lower inflation rate, to be followed by the lowering of the key lending rate;
- The low share quotations and, following a three-year slump, the financial potential inherent in shekel investment in the market and in savings schemes, whose terms are becoming progressively shorter;
- The decrease in the floating quantity of shares in the economy, due to massive purchases by parties at interest.
All these will result in a situation in which “a large quantity of money will pursue scarce merchandise”. Rothstein believes the share market is “at the beginning of a bull market”, no less.
For the solid component of the investment portfolio, Rothstein-Bloch recommend investing in the shekel channels only, primarily in shekel debentures of the Shachar type (bearing a fixed rate of interest). In their opinion, the expected decrease in the inflation rate results in a position in which the shekel channel yield is the most attractive in the market in shekel terms.
The balance of the portfolio money, according to Rothstein, should be directed exclusively to the share channel, particularly Karam shares and Israeli shares on overseas markets. He uses the term “calculated risk” to describe the act of investing in shares today, noting that the Karam is still a long way off its peak and that some of the Israeli market’s most promising companies are being traded on Wall Street. It is true, of course, that some of the riskiest companies in the market, belonging to the technological sector, are also being traded on Wall Street, but in Rothstein’s opinion, this risk can be hedged by correct distribution and appropriate selection. The shares recommended for investment are as follows:
Shares in Tel-Aviv
1. Liraz: a computer company operating in Israel and abroad. A plan for streamlining Ya’ana, the subsidiary company, is expected to boost profits in Israel, as also is the constant rise of computerisation requirements in Israel. The subsidiary on Wall Street has exclusive rights for the development of software from Microsoft, which will begin to be marketed in the second half of 1997. Rothstein considers this very promising.
2. PCB: One of the two biggest companies in Israel in the field of printed circuits. The company is expected to grow to keep pace with the growth of the field and of the electronics industry in general. The fierce competition in the sector is expected to become more moderate. The subsidiary company Comtec has an especially high rate of growth, and is expected to be issued on Wall Street.
3. Darban Investments: “It would be a shame not to take the opportunity to be a partner of Eliezer Fishman”, writes Rothstein, “especially, by the way, at such a good price”. Here he names the Greenberg marketing chain-store and a long series of promising real estate assets.
4. Dovrat Shrem: “See our comment on Eliezer Fishman”, writes Rothstein, not forgetting to mention the anticipated recovery of the capital market and the company’s successful venture capital funds, whose investments are expected to mature into a profit in the near future.
5. Knafaim - Arkia Holdings: The owners of the Arkia airline get high marks by virtue of the company’s excellent cash flow, control of the Israeli tourism market and its ability to profit from this field even in hard times.
6. Telsys: engages in the sale of electronics components, and is one of the biggest companies in its field, with an annual growth rate of 10%-15%. It will benefit from the growth of the electronics industries.
7. Point of Sale: The leading company in the Israeli economy in the field of sales outlets. It exports most of its output. It is growing at an annual rate of more than 50%. If the company continues to grow efficiently in 1997 too, the next step will evidently be an IPO in New York.
8. Imco: The company posts a consistent improvement in profits, while the orders backlog increases and management is efficient and modest. The company proved adept at utilising issuance moneys to upgrade a real estate asset in the Haifa area. It wound up all its Tel-Aviv Stock Exchange years with a profit (as opposed to a large part of the other Karam shares).
9. Evrot Industries: engages in piping. The company implemented a turnaround plan, and has since been posting a profit. Over the next few years, the market can be expected to undertake a number of national projects connected with pipe-laying (import of natural gas, relocation of Pi-Glilot etc.), which will enable the company to continue to grow.
10. Caprice: a jewellery manufacturing and marketing company. The company has sales centres throughout Israel and has managed to continue to earn even during the tourist traffic slump.
Israelis on Wall Street
Companies recommended for investment in New York:
11. Nice: engages in information systems and computer-telephone integration. It wound up 1996 with sales of $44 million and is expected to reach $70 million this year. The company manages to insinuate itself into new and promising niches in its field, enabling it to continue to grow.
12. Gilat: a world leader in the satellite communications field. Has maintained impressive growth rates for a number of years. By entering into new fields and acquiring companies, it will consolidate its future progress.
13. M-Systems: A unique high-tech company (manufactures flash chips), it still in its start-up stages. Because its field is still virgin territory, the company has suffered ups and downs, which are evidently still not over. However, the company has agreements with electronics giants such as Intel, Microsoft, Nokia and others, and is expected to achieve a breakthrough when the field in which it operates stabilises.
14. Silicom: A company with an advanced technology, putting it on a footing with giants such as Zircom, 3Com and others, The company has a number of developments, and contrives to come out with new developments before its competitors. It presents an annual growth rate of 50%, which it expects to maintain also in 1997. The company has yet to be discovered by US investors, due to its limited volume of activity, but this drawback will vanish in 1997, when there could be a very high yield on the company’s share.
Previous Recommendations:
The above recommendations were made by a person/s working in the investment industry, who may hold positions in securities mentioned in the column. This column should not be taken as advice to buy, sell or continue to hold any securities, and anyone acting on the advice of this column does so at his or her own risk