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BY WARREN BOROSON
NEWJERSEYNEWSROOM.COM
BOROSON ON MONEY
The Tel Aviv Stock Exchange has climbed around 50 percent this year.
Next year, MSCI – which tracks the world's markets – will raise Israel from "emerging market" status to "developed market" status.
In 2006, Warren Buffett's Berkshire Hathaway paid $4 billion to buy 80 percent of Iscar Metalworking, an Israeli company. Said Buffett, "You won't find in the world a better-run operation than Iscar. I don't think it's an accident that it's run by Israelis."
So, if you already own a diversified portfolio of foreign stocks, you might consider giving yourself some exposure to Israeli stocks – unless you just want to buy Teva Pharmaceuticals, a key reason why the Israeli market has done so well recently. Teva is the leading manufacturer of generic drugs in the United States, the leading manufacturer of antibiotics throughout the world. It's to Israel what Nokia is to Finland.
A very readable new book, "Start-Up Nation," by Dan Senor and Saul Singer, tries to explain Israel's "economic miracle." A key reason they give: All Israeli Jews must serve a few years in their army, where at an early age they learn how to be leaders and how to take reasonable risks. Senor, adjunct senior fellow for Middle Eastern studies at the Council on Foreign Relations, spoke last week at the Kaplen Jewish Community Center on the Palisades in Tenafly.
A good way to invest in Israeli stocks is via an exchange-traded fund, with its typically low expenses. iShares Israel (EIS), an index fund traded as a stock, follows the Morgan Stanley Capped Investable Market Index. Recent price: $53.69. It was launched in March of 2008.
The fund's expenses are 0.63 percent.
But Don Dion, an analyst, claims that EIS "struggles" with a diversification problem. Recently it had 22.28 percent of its portfolio in just Teva. For information, call (800) 474-2737.
A closed-end fund, First Israel (ISL), trades on the New York Stock Exchange. Expenses: 1.7 percent. Recent price: $15.275. It was launched by Credit Suisse Asset Management in 1990, and is headquartered in Philadelphia. Unlike EIS, First Israel is actively managed. Phone: (866) 839-5205.
Because buyers and sellers of a closed-end fund trade among themselves, not through a fund company, the price per share of the fund may be less, or more, than its individual shares are worth. Recently First Israel was trading at a 7 percent discount.
But an investor may wind up selling shares at the same discount, or an even greater one.
Still, a clear advantage of a closed-end fund is that the managers won't be forced to sell their holdings if investors panic – which is typically the exact wrong time to sell out.
Finally, there's a traditional "open-end" fund, the Amidex35 Israel Fund. (Named after a word for "friend," and the word "index.") Its three- and five-year records are impressive, though its ten-year performance is just average. Reason: the fund was launched in 1999, just when the dot.com bubble was about to burst.
This fund is also an index fund, but it includes stocks on Wall Street, not just in Tel Aviv. It owns the 35 largest Israeli stocks on the Tel Aviv Exchange as well as on the New York Stock Exchange and the Nasdaq.
The fund's expenses are high, partly because the fund has relatively little money: $18.5 million. Clifford Goldstein, president of Amidex35, adds that there's little competition among the fund's suppliers.
You can buy in Amidex35 shares directly by calling 1-888-876-3566. The minimum first investment is $500, with $250 for re-investments. There's a 2 percent redemption fee for shares held for less than a year.
Have a question? Write to This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Did you ever work for the Medical Economics company? Ex-employees are having a reunion. For details, please write to me.
