The only time anyone really thinks about Israel tends to be when there’s conflict in the Middle East. After all, the developed market nation is located in a pretty bad neighborhood. And considering that the majority of its neighbors want to blow it of the map, most investors just pass Israeli stocks right on by.
However, that could be a huge mistake. Israeli stocks could be huge winners over the longer haul.
Israel is a high-tech powerhouse. Unlike most of its neighbors, Israel wasn’t blessed with large oil and natural gas reserves. (That is, until recently.)
In order to grow its economy, the nation plowed big bucks into research. If Israel was going to grow its economy, it was going to do so through software, tech, engineering and healthcare.
And grow it has. Israel’s economy is set to expand at 3.5% this year.
Today, many Israeli stocks sit at the top of the leader boards in their respective industries. In fact, there are hundreds of Israeli stocks listed on the venerable tech-oriented NASDAQ. Yet many investors probably have no idea are those companies are even domiciled in the nation.
With that in mind, here are three Israeli stocks to buy today.
Israeli Stocks — Teva Pharmaceuticals (TEVA)
No discussion about Israeli stocks would be complete without including healthcare giant Teva Pharmaceuticals (TEVA). TEVA is the world’s largest producer of generic drugs. Knock-off drugs heftily contribute to its bottom line.
However, the Israeli pharma stock is more than non-name brand ibuprofen. TEVA is huge specialty drug maker as well. Its monster multiple sclerosis drug Copaxone produces about 20% of its quarterly sales.
And while Copaxone is set to fall off-patent, TEVA isn’t resting on its laurels. It’s actually going on the hunt.
First off, TEVA owns about 5% of biotech firm Mylan (MYL). The Israeli firm continues to be a stalking horse and has made several (sometimes hostile) bids for the firm. More recently, Teva made a $40.5 billion bid for Allergan’s (ACT) generic biotech drug business. That buy will basically give TEVA around 1,000 new products to stuff into its pipeline. Those products will be essential to help replace lost sales from its blockbuster Copaxone once it officially falls off-patent.
Meanwhile, shares of the Israeli stock are pretty cheap. TEVA stock trades for a forward P/E of just 11 and comes with a 2.7% dividend yield. Given the growth projections for TEVA, that’s a pretty good deal indeed.
Israeli Stocks — Check Point Software Technologies (CHKP)
Most investors are familiar with many Israeli stocks products, but are completely unaware that they came from the nation. Case in point: Check Point Software Technologies (CHKP).
Every time you’ve bought something online, you’ve used CHKP’s original contribution to the internet. The firm created the now-common “shopping basket” that’s on every e-commerce website. Since then, Check Point has gone on to become a giant in the cybersecurity marketplace. It actually created the first cybersecurity firewall. Nowadays, CHKP provides everything from software, hardware and consulting services to businesses and governments to help prevent various cyber-crimes.
And that’s a good business to be in. During its latest earnings report, CHKP saw an 11% jump in its year-over-year earnings per share and 9% increase in its total revenues. Cash flows — which have supported a generous buyback program — also surged.
With cybersecurity spending still rising and CHKP expanding into mobile and cloud security solutions, the times should continue to be good at the firm. Meanwhile, Check Point shares still seem cheap when compared to many of its peers. That combination of value and financial health means CHKP is one of the best Israeli stocks to own.
Israeli Stocks — CaesarStone Sdot-Yam (CTSE)
There’s an old Wall Street adage that says, “Buy when there’s blood in the streets.” To say that CaesarStone Sdot-Yam (CSTE) has been bloodied is an understatement.
CSTE has fallen by about 45% since a report came out from Spruce Point Capital Management — a noted short seller who has a short position in CSTE stock. Spruce Point claims that CaesarStone sells substandard products at premium prices, that its business model is unsustainable and that the firm is overstating its profit margins.
CaesarStone is maker of quartz and polymer countertops, tiles and other stone-based housing products. Typically, CSTE’s products are found in higher-end homes — a sector of the housing market which is flourishing. The Israeli stocks market share has grown from about 3% in 2012 to about 14% today.
According to analysts at UBS, the Spruce Point report and CSTE stock’s subsequent recent declines are bogus. Aside from the fact that firms have a right to sell products at whatever prices the public is willing to pay for them, the current CSTE stock price doesn’t factor in any growth in the U.S. housing market. According to UBS, that growth should put CaesarStone shares at about $67 — about double today’s selling price.
That kind of upside makes CSTE one of the best Israeli stocks to buy for a medium-term trade.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.