The Rise of Israeli Defense Equities in a Changing Global Security Order

Israel’s defense sector has moved from a specialized corner of the local market to one of the most closely watched areas of the Tel Aviv Stock Exchange. As global security needs evolve, Israeli defense companies are attracting growing investor attention because their technologies are not theoretical — they are being tested, refined, and deployed under real-world conditions.

What Is Driving the Rise of Israeli Defense Stocks on TASE?

The short answer is sustained conflict combined with global demand for proven systems. Over the past two and a half years, Israel has faced continuous security pressure across multiple fronts, from Gaza to Lebanon and tensions involving Iran. This has translated into a real-time testing ground for military technology. Financial markets tend to reward visibility, and Israeli defense companies now offer exactly that: systems that are not theoretical but operational.

The Tel Aviv Stock Exchange has reflected this shift. A dedicated defense index, launched just six months ago, has already recorded gains of 31%, with early performance suggesting investors view the sector as structurally supported rather than cyclical. This is not a short-term spike driven by headlines. It is a repricing of companies whose products are now central to modern warfare.

At a broader level, global defense spending has been rising following the Russia-Ukraine war, and war in the Middle East has added another layer of urgency. Israeli firms sit at the intersection of these trends.

Recent reporting highlights that global demand for Israeli defense systems has accelerated meaningfully, with exports reaching record levels as countries prioritize technologies that have been tested in real-world conditions. In particular, systems related to air defense, drones, and battlefield intelligence have seen heightened interest from Europe and other regions responding to evolving security threats.

This growing demand reflects a broader shift in procurement priorities: governments are increasingly favoring solutions that demonstrate proven performance under operational stress. Israel’s defense sector, shaped by continuous real-time deployment, is therefore gaining strategic relevance beyond its domestic market.

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Which Israeli Defense Companies Are Listed on the Tel Aviv Stock Exchange?

Israel’s defense ecosystem includes both large, globally recognized firms and smaller, specialized companies. The larger players provide scale and stability, while smaller firms often deliver niche technologies tied to emerging battlefield needs.

Here are several publicly traded defense companies listed on the Tel Aviv Stock Exchange:

Elbit Systems stands out as the anchor of the sector. This company provides a benchmark for international demand. Meanwhile, companies like NextVision represent the newer wave, focused on components critical to unmanned systems.

This mix gives investors exposure across the value chain, from full-system integrators to specialized component suppliers.

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How Have Recent Conflicts Increased Demand for Israeli Defense Technology?

Modern warfare has shifted away from large, conventional engagements toward distributed, technology-driven systems. The wars involving Israel over the past two and a half years have accelerated this transition. Drones, precision-guided systems, and layered air defense have moved from supporting roles to central pillars.

Israeli technology has been shaped directly by these conditions. Systems such as Iron Dome and more advanced layered defense solutions are not just theoretical frameworks; they have been deployed repeatedly under real threat conditions. This is relevant for procurement decisions abroad. Governments are less interested in untested systems and more focused on what works under pressure.

There is also an economic dimension. Analysts have increasingly highlighted the “cost asymmetry” problem: cheap drones or rockets forcing defenders to use expensive interceptors. Israel’s development of lower-cost solutions, including laser-based interception systems co-developed by Elbit Systems, directly addresses this imbalance.

The result is a shift from domestic necessity to global adoption. Technologies refined in Israel are now being integrated into defense strategies in Europe, North America, and parts of Asia.

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Why Are Investors Paying Attention to Smaller Israeli Defense Companies?

The larger Israeli defense players are already well known and often valued accordingly. The real volatility — and potential upside — may sit with smaller companies.

Recent market reactions illustrate this phenomenon clearly. During periods of escalation, smaller defense stocks have posted sharp one-day gains, in some cases exceeding 10%–20%. Companies such as Aerodrome, Third Eye Systems, and others tied to drone and surveillance technologies have reacted quickly to geopolitical developments.

Next Vision Stabilization System supplies sophisticated camera systems, including infrared cameras, that can be mounted on drones

This behavior reflects two realities. First, smaller firms are often more directly exposed to specific technologies, such as UAV components or tactical communications. Second, they remain underfollowed, meaning price discovery can be abrupt.

However, this cuts both ways. Some of these companies have also experienced significant drawdowns over the past year. In this segment of the market, volatility is not an aberration but a defining characteristic — one that demands careful positioning rather than passive exposure.

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How Can Foreign Investors Access Israeli Defense Exposure?

Foreign investors have several routes into the Israeli defense sector, and the choice depends on their level of sophistication and access.

Currency is also a factor. The shekel’s strength over the past year — and really over the past 25 years — has significantly amplified returns for foreign investors, though currency gains cannot be guaranteed for future investors.

One path is through a few dual-listed companies such as Elbit Systems, which trades on Nasdaq. This removes direct exposure to Israeli currency because the shares are traded in U.S. dollars, while still providing exposure to Israeli defense demand. Unfortunately, only a small number of Israeli companies in the TASE defense index are dual-listed on both TASE and Nasdaq.

For those with access to TASE directly — and who desire shekel exposure that may or may not increase returns — the new TASE defense index offers a diversified entry point. It aggregates companies across the sector, reducing single-stock risk.

But not all companies in this sector have equal fundamentals or equal promise. Another method for gaining Israeli defense exposure, together with shekel exposure, is through a managed investment account with an Israeli-licensed portfolio manager or a U.S. SEC-registered investment adviser firm. Wise Money Israel is licensed locally in Israel and registered with the SEC, and performs its own fundamental analysis on Israeli companies, including defense companies, when investing on behalf of clients in what it believes will provide the client a better risk-adjusted return.

Another indirect route is through global defense ETFs, some of which include a small number of Israeli companies as part of broader international holdings. Many of these ETFs limit the inclusion of Israeli defense firms when they have geographic mandates, such as U.S.-domiciled-only exposure. Therefore, buying such an ETF may dilute the specific exposure to Israeli defense firms.

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What Risks Should Investors Consider Before Investing in Israeli Defense Stocks?

The risks of investing only in this volatile sector are real and, if ignored, expensive. Defense spending is ultimately political. While current trends point upward, they are not guaranteed. A shift in diplomacy, a de-escalation in key regions, or budget reprioritization could slow procurement cycles more quickly than markets expect.

Valuation is another pressure point. After a strong run, parts of the sector are no longer attractively priced. Investors buying into momentum without a clear view of earnings durability risk paying for growth that may already be reflected in the share price.

Concentration risk also remains. Much of the sector’s demand is tied, directly or indirectly, to geopolitical instability. If tensions ease materially, order growth may not collapse, but it could normalize, and markets tend to reprice that shift quickly.

Smaller companies add a further layer of risk. Many rely on a narrow customer base or a limited number of contracts. Execution missteps, delays, or technological shifts can have disproportionate effects on their valuation.

These risks do not invalidate the investment case, but they do require discipline. In practice, they are best managed through active oversight. A portfolio manager with a clear mandate to anticipate emerging economic and financial trends — rather than react to headlines — can adjust exposure, rebalance positions, and differentiate between structural growth and temporary enthusiasm.

Conclusion

Seen in that light, the broader investment case becomes clearer. The rise of Israeli defense stocks is not simply a reaction to recent conflict. It reflects a deeper shift in how military capability is developed, tested, and ultimately procured. Systems proven under real conditions are gaining relevance far beyond Israel, and financial markets have begun to price that reality.

For investors, the opportunity is clear but not without complexity. This is not a passive story. It requires selectivity, an understanding of geopolitical drivers, and a willingness to navigate volatility. Those who approach the sector with discipline rather than enthusiasm may be better positioned to participate in its long-term potential.

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IMPORTANT DISCLOSURES & RISK INFORMATION

This content is provided for educational and informational purposes only and does not constitute investment advice, a solicitation, or an offer to buy or sell any securities. Investing in international markets, including Israeli securities and defense-related sectors, involves material risks, including but not limited to market volatility, geopolitical risk, sector concentration risk, liquidity risk, currency risk, and the potential loss of principal. Past performance is not indicative of future results. Wise Money Israel does not guarantee any specific outcome, return, or profit. Any references to specific companies are for informational purposes only and should not be understood as a recommendation to buy, sell, or hold any security. Individuals should consult with a qualified financial advisor, tax professional, and/or legal counsel before making any investment decisions. Diversification does not necessarily ensure a profit or protect against loss. © 2026 Wise Money Israel. All rights reserved.

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To understand where Israel is today, one must see how its past cultivated many of its present strengths. From its very early days, Israel made heavy investments in education, science, and defense. The famous Unit 8200 (the intelligence corps’ signals unit) trained many of the people who later left government service to found tech firms. Those roots in military R&D are not some odd byproduct of necessity – they shaped a culture of rapid prototyping, of solving hard problems under pressure, and of intense collaboration. These are precisely the qualities investors seek in frontier markets. As Jonathan Medved’s OurCrowd shows, even relatively young investment platforms in Israel tap into that reservoir of domestic talent in science, engineering, cybersecurity, AI – areas where global growth is high.

Over the decades Israel has transformed. No longer only a defensive frontier, it has become “Startup Nation” because every new wave of crises has been matched by waves of new enterprise. In the late 1990s and early 2000s, Israel’s high-tech sector was already expanding rapidly, becoming a key driver of the economy. The Shoresh Institution’s research confirms that high-tech’s share of GDP nearly doubled from 9% in 1995 to over 17% by 2000, then remained relatively stable through the following decade, with renewed returning after 2018.

Today, investors see beyond metaphor, they actually see numbers. Foreign direct investment (FDI) has been growing over the past decade. Even during times of conflict – yes, even war – investment into Israeli tech has shown surprising resilience. In the first six months of 2025, Israeli startups raised about $9.3 billion in private capital across 365 funding rounds, up 54% from the second half of 2024. What changed in composition matters: more large rounds in mature companies, more emphasis on cybersecurity, fintech, enterprise software. These are bets not on hope, but on proven capacity.

If the past built the foundation, the present is testing it under real weight. The war that broke out in October 2023 posed many risks – geopolitical, operational, human. Some international investors hesitated. Some companies saw business disruption. Yet many others leaned in, recognizing that the long-term story of Israel is not about war alone, but about deep technology, export orientation, government support, and global partnerships. The Israel Innovation Authority, the emphasis on export accounts, the trade surpluses in certain sectors even amid conflict – all of this signals that the economy has more than one pillar.

Sources: Bank of Israel, IVC Data and Insights, Central Bureau of Statistics, CapIQ as of July 7, 2025. (1) 2024A Full Year Numbers. Central Bureau of Statistics as of December 31, 2024 . (2) Bank of Israel’s Research Department Staff Forecast Report (July 7, 2025). (3) As of May 31, 2025.

Let me share a story of two investor archetypes (without naming names) that illustrates how past and future collide. First, there’s the global institutional investor – let’s say it is a sovereign wealth fund – that came into Israel years ago, drawn by highly skilled engineers and access to defense-technology start-ups. Over time that investor saw healthcare start-ups, AI firms, quantum research, and agro-tech. They stayed through turbulence because the tailwinds of innovation were strong, and because they believed Israel’s institutions – its universities, its venture ecosystem – would continue to deliver. Then there’s the founder-investor, someone who served in the IDF, left with connections, a mindset of solving mission-critical problems, then built a company that got acquired by a tech giant. That person then reinvests in new start-ups, mentors, builds incubators. That loop – founder to re-investor to founder again – is part of what powers the bridge between past and future. It is not mythical; it is visible in firms like Jerusalem Venture Partners, in OurCrowd, in many smaller players. Corner Ventures+3Wikipedia+3Wikipedia+3

Looking ahead, what should potential investors watch for – and what makes Israel not just interesting, but potentially exceptional?

First, deep tech. Israel now has over 1,500 Deep Tech companies, and since 2019 those companies have attracted over $28 billion in investments. Fields like photonics, quantum computing, digital health, advanced manufacturing, food-tech – all are growing rapidly from strength. Second, cybersecurity remains a core asset. In periods of relative calm or conflict, demand for cybersecurity and related tech only increases. Israeli firms are globally competitive there. Third, mature rounds are becoming more important – less speculation, more scaling. Investors are increasingly backing companies beyond seed stages, betting on traction and revenue as well as on the promise of what might yet be.

Yet, challenges remain, and no bridge is without its gaps. Geopolitical risk is real. Investor sentiment is fragile; legal or regulatory changes can carry outsized weight in perception. Infrastructure and cost pressures (real estate, talent competition, international liability etc.) are growing. And while many companies export, Israel is relatively small, which means scaling globally is not optional but essential. Also, the macro picture – fiscal deficits, war-driven expenditures, debt burden – ask for caution.

What Israel offers, if one leans in, is something uncommon: a place where past lessons in survival, innovation, academic strength, and problem-solving under constraint combine with a future orientation that seeks not merely growth but global leadership in next-generation challenges. It is a kind of “investor’s dialectic” where you carry forward history’s tools but always ask: what next?

For many, the lure is that bridge itself. The reliability of past performance gives credibility; the uncertainties ahead bring opportunity. To stand on that bridge is to acknowledge risk and reward together–not to choose between them. If you understand both Israel’s scars and its ambitions, you start not with fear, but with curiosity. And sometimes, that is what leads to the best investments.

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Israel’s Economy is Tough as Nails – No matter what challenges come its way, Israel’s economy always seems to bounce back. From global recessions to geopolitical tensions, most publicly traded companies in Israel have learned how to adapt, and that’s reflected in the strength of the stock market. Even during war, the Tel Aviv 125 stock index has risen over 50% in just the past 12 months. Half of the index companies rose on average over 114%!

Tech, Tech, and More Tech – If you love investing in innovation, TASE is a gold mine. Israel’s high-tech sector is booming, with world-class companies in cybersecurity, fintech, AI, and biotech. Some of the most exciting Israeli start-ups grow into major players in the public markets, and TASE gives investors a front-row seat. Tel Aviv 125 techology sector companies averaged a return of over 80% in the past 12 months.

More International Investors Are Joining the Party – Over the past decade, foreign direct investment in Israel has grown significantly. Thanks to market reforms and better transparency, it’s easier than ever for international funds to get involved, making the market more liquid and dynamic. International investors are seeking a strong currency for diversification, and Israel is supplying that, with the Shekel appreciating against the US Dollar by 9.3% so far in 2025. TASE equity market cap increased 21% in the first six months of this year alone, with trading volumes increasing 40% in the first half of 2025. Investors around the world generally can open a Shekel-based Israel investment account in less than 30 minutes.

A Mix of Everything – Unlike some stock markets that are dominated by a small number of sectors, TASE has a great mix—finance, energy, real estate, healthcare, fashion, defense, food, chemicals, telecommunication and, of course, tech. That kind of diversification makes it easier to manage risk.

The Government is Pushing for Growth – Recent financial reforms and government incentives have made investing in Israel more appealing. Whether it’s tax benefits, alignment with international trading standards, or improved regulations to encourage competition, policymakers are working to ensure TASE remains competitive.

At the end of the day, investing is about finding strong, forward-thinking markets, and for me, TASE continues to check all the right boxes. If you’re looking for a market that offers resilience, innovation, and growth, the TASE is definitely one to watch!

The post 5 Reasons the Tel Aviv Stock Exchange Continues to Attract Investors appeared first on Wise Money Israel.

In the photo from right to left: Prof. Eugene Kandel, TASE Chairman; Seffy Zinger, Chairman of the ISA; Bill Ackman, CEO of Pershing Square Capital Management, L.P. and Ittai Ben Zeev, TASE CEO. Photographer: Elad Gutman. Free of charge.

Bill Ackman’s investment firm manages approximately $20 billion, making him one of the notable hedge fund managers in today’s market. Mr. Ackman last year took an approximate 5% stake in the Tel Aviv Stock Exchange through his own personal funds (a first for Mr. Ackman). Mr. Ackman noted that his investment in the TASE stock was “probably the best investment I’ve ever made”, referring to his almost 300% return in under two years (gaining him $73 million). He indicated that he does not intend to sell his shares.

“The value of a country is the value of its total assets minus its liabilities. The liabilities are the national debt. The assets are the people, the intellectual property, the companies, the land. In Israel’s case, the value of its assets — especially its intellectual assets — far outweighs its liabilities.” - Bill Ackman

The billionaire indicated that he intends to invest another $1 billion in companies in Israel.

Mr. Ackman, a Jewish-American billionaire, outspoken Zionist, and one of Wall Street’s most prominent activist investors, is also a notable public figure recognized for his vocal advocacy against antisemitism and his strong support for the State of Israel, particularly since the outbreak of the "Swords of Iron" war on October 7, 2023.

Bill Ackman said during the ceremony: “After October 7th, I realized there was a much bigger problem in the world. That realization came from my own university [Harvard University], where 34 student organizations released a letter saying that "Israel is solely responsible for the acts of Hamas," even though Hamas was still operating on Israeli soil. One of the worst days of my life was October 7^th.

Owning an exchange is like owning a royalty on the success of a country. And I said very publicly at the time that I thought there's no better time to invest in Israel.

As bad as October 7th has been for Israel, for Jewish people, for the world, a lot of good has come out of it. I think if you look at the last less than two years, there's been a complete reset of the Middle East situation in a way that I think is extremely favorable for Israel. I think we're close to the end of this war, and I think we're on a path to prosperity and peace. I'm very optimistic about the future. I think the Abraham Accords are going to get expanded.”

Seffy Zinger, Chairman of the Israel Securities Authority: "The performance of the Israeli capital market – and its leading indices over the past two years – serves as a reflection of the Israeli economy as a whole, showcasing exceptional resilience and strength. These results are thanks to the executives of Israel’s leading public companies present here today, as well as the investors, including foreign investors, who have demonstrated and continue to demonstrate confidence in the Israeli economy. A clear example of this confidence was Bill Ackman’s decision to purchase 4.99% of TASE shares at the beginning of 2024, right in the midst of the war. This was a significant vote of confidence in Israel and in the Israeli capital market. The Israeli capital market can and should be a leading player and an integral part of the global financial system, and we are taking concrete steps to make this happen. The transition to a Monday–Friday trading week is part of this strategic vision – a step that will bring the Israeli capital market closer to international investors and strengthen Israel’s position as an attractive investment destination on the global stage.”

“It’s a country that has proven itself exceptionally over the past two years, both militarily and technologically. Israel has also proven itself as a democracy. It’s a country where many people feel comfortable criticizing their leader — and that’s a good sign.” - Bill Ackman

Ittai Ben-Zeev, TASE CEO: “We are proud to host Bill Ackman, one of Israel’s greatest friends, here at the Tel Aviv Stock Exchange, a symbol of Israel's economic resilience. The last two years have been very challenging for the Israeli economy and the local capital market in the wake of the war. Despite these challenges, TASE has reached record highs, reflecting the robustness of the Israeli economy. Much of this success is a testament to the resilience and strength of Israeli society and our public companies.”

Sources: TASE, Ynet, Globes

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Today, we highlight Perion Networks, a global technology innovator in the digital advertising ecosystem. This Israeli firm, founded in 1999, provide companies with an opportunity to unlock online growth opportunities. The organization operates across three main segments of digital advertising space – social media, ad search, and Connected TV/display/video. The Total Addressable Market (TAM) is believed to be worth $300 Billion (and over $500 Billion by 2024).

Total Addressable Market for advertising

A New Standard Delivered Using AI

Perion Network delivers Artificial Intelligence (AI)-driven advertising solutions to advertisers and publishers. It further develops digital advertising solutions to capture consumer attention and increase engagement. In addition, Perion also provides online advertising and mobile applications.

The steady growth of social advertising was accelerated by COVID-19 and the boom in e-commerce. Perion’s social marketing platform offers a dashboard for marketers that makes it easy to manage and optimize advertising campaigns in real-time. Designed with social media in mind such as, Twitter, Instagram, Facebook, Snap, TikTok, Google, Linkedin and Pinterest on a cross-network basis. This leads to happy advertising clients with improved ROI. Their high-profile clientele includes Pepsi, RedBull, Louis Vuitton, Mercedes-Benz, Delta, Samsung, BMW, Toyota and Dell. They also provide advertising solutions for big media companies like Disney, ABC, CBS, A&E, BBC, NBC, and Fox News.

Perion further strengthens its technology position by evolving an integrated offering, branded as “Capture and Convince.” The new technology represents a significant industry advance in the user funnel. With its new user loop, it employs AI and machine- learning techniques. The result is optimized advertising and content for brand-safe sites which has been shown to engage new users for up to six minutes. Engaging users online this long generates significant revenue-per-session for the advertiser while uniquely satisfying the needs of the user.

Perion also provides publishers with increased web traffic, higher engagement, and increase in revenue-per-session. Their digital advertising search monetization solution captures consumers at the moment of highest intent to purchase. The firm has a longstanding relationship with Microsoft Bing and other leading search and content partners across 34 countries. That is how it implements its monetization solution more effectively than conventional search solutions.

Ad spend on digital media

Perion Sees Surprising Growth During COVID-19

With COVID-19 shutting down economies around the globe, Perion (and other companies in the sector) emerged as benefactors of the changed business environment. Even as the pandemic sent shockwaves through the market, the company has managed to deliver robust growth, with overall annual revenue Year-over-Year growing by 20%. Display and social advertising revenues are growing 159% Year-over-Year despite COVID-19.

Growth of Perion Revenue

The strength of the balance sheet is manifested in declining debt levels. In 2017, the company's debt stood at $60.7M. Last year, that amount plunged to only $10.4M. Over the same period, cash position improved from -$47M to +$37M, a difference of $84M in just 4 years.

This dramatic shift enabled Perion to make strategic acquisitions and enabled significant new investments in Research & Development.

Perion debt-to-cash ratio

Benefit From Wise Money Israel's Research Team

Wise Money Israel has held this Israeli technology stock as part of our client managed portfolios, and in the past year, the share price rose 173%. Also, our firm purchased and strategically took profits during the past 12 months, increasing even further our client’s gains on this stock.

This example demonstrates the Wise Money Israel process: investing in Israeli companies low in debt and high in revenue that demonstrate growth in its top line, as well as earning growth on the bottom line.

If you would like to see this kind of growth for your portfolio, please contact us about investing in Israel.

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Investing in Israeli stocks and bonds is done on the Tel Aviv Stock Exchange (TASE), Israel's single national exchange, though accounts at Israeli brokerages and banks. This is where Israeli corporations raise capital to finance investments and activities, and where the government bring the public into its companies as they are privatized. The state-of-the-art exchange is also home to the local investment community and securities sector.

Both Israeli and non-Israeli investors, from any country, may invest on the TASE online, and in English.

History of the TASE

Local trade in securities began in the 1930s, years before the formation of the State of Israel. Trade was carried out through the Exchange Bureau for Securities, founded by the Anglo-Palestine Bank (which became Bank Leumi Le-Israel) in 1935.

With the formation of the State of Israel in 1948, a pressing need arose to formalize trade in securities. In September 1953, a number of banks and brokerages joined forces and established the Tel Aviv Stock Exchange.

Since the mid-1990s the Tel Aviv Stock Exchange (TASE) has been adapting to meet the standards of the most advanced exchanges in the world. Physical trading floors, long abolished, have been replaced by a computerized system.

Structure

The TASE is a private company limited by guarantee. It is owned by its members, both banks and non-banking corporations such as brokerages, through which anybody may trade in the securities listed on the exchange. Trading is carried out between TASE members on behalf of their customers. The TASE operates under a license granted by the Minister of Finance. The Israel Securities Authority supervises the TASE’s activity.

TASE by the Numbers 

• Total Market Capitalization: $515 Billion
• Daily Trading Volume: $1.8 Billion
• 3-year Israeli Stock Performance: 37% (General Share Stock Index, 2013-2015)
• Mutual Funds: 1,386
• Stocks: 460
• Corporate Bonds: 600
• Government Bonds: 45
• Net International investors purchase of equities: $1.6 billion
• High-tech companies listed: 130 (55 biomed)
• Exchange Trade Notes (Funds): 638

Trading

Stock trading monitor

Trading of securities occurs every Israeli business day: Sunday-Thursday, between 9:00 a.m. and 5:35 p.m. Trading is divided into distinct phases of trading, with specific rules: pre-open, opening, continuous trading, pre-closing and closing auction. Market Makers began working on the TASE in 2003. Trading is performed via TASE member firms (banks, brokerages, insurance companies), who transmit orders to the central exchange on behalf of their customers. TASE members’ central computers are connected to the trading computer, so that branch employees can transmit orders online. Most TASE members enable their customers (investors) to transmit trading orders via the Internet and through other computerized means, in English or Hebrew.

Survivability and Backup

Extensive efforts have been invested in planning and constructing the TASE’s computer system, in order to ensure that it is always available for TASE members to transmit their customers’ orders quickly and efficiently, and to provide service without malfunctions and interruptions.

The TASE has established a sophisticated survivability structure for its computerized systems as well as the communications and electrical networks serving their system. The backup structure includes a “hot backup” facility located off-site, at a distance from Tel Aviv, at which trading and clearing can be carried out in the event that they cannot be performed on TASE premises.

Order Size

The minimum order size is the smallest trading unit in securities on the TASE. In equities, the minimum is one share; in warrants, one trading unit of a warrant; in convertible bonds, one NIS par value.

Circuit Breakers

As in all major exchanges around the world, when necessary, the Tel Aviv Stock Exchange exercises "price monitoring" and "circuit breaker" mechanisms in order to mitigate volatility on a given trading day. When the Tel Aviv leading stock index (Tel Aviv-25) fluctuates sharply, opening trading is postponed or trading is halted, as applicable.

Order Types

The following types of buy and sell orders may be submitted:

• Market orders (MKT) – A market order is an order submitted without a designated price limit
• Limit orders (LMT) – A Limit order is submitted with a stipulated price limit
• Limit-at-Opening orders  (LMO) – A Limit-at-Opening order is submitted with a stipulated price limit. A LMO order, or part of it, which is not executed during opening trading is automatically cancelled.
• Stop-Limit orders (STL) – A Stop-Limit order is a Limit order submitted with a condition attached
• Iceberg orders (ICE) – An Iceberg order is an order submitted in 3 portions for execution: the total volume, the first peak and an additional peak designated for display
• Fill or Kill orders (FOK) – A Fill or Kill order is a Limit order for full immediate execution. An order not executed in full or immediately is automatically cancelled and is not listed in the order book.
• Immediate or Cancel orders (IOC) – An Immediate or Cancel order is a Limit order for immediate execution, even if the execution is partial. An order, or part of it, which is not executed immediately is automatically cancelled and is not listed in the order book.
• Limit-at-Closing orders  (LMC) – A Limit-at-Closing order is submitted with a stipulated price limit,. A LMC order, or part of it, which is not executed during closing trading is automatically cancelled.

Financial Products

The Tel Aviv Stock Exchange offers a wide variety of investing options. All are traded electronically online. An interesting feature of the TASE is that Israeli corporate and government bonds, which have a 1 NIS minimum, are all traded online with small spreads and low commissions. This compares favorably to the U.S. market, where bonds are traded over-the-counter, incurring large spreads (hidden fee), high broker commissions, and high minimums. The following is a list of investment choices in Israel:

• Stocks
• Convertible Securities
• Fixed Income
  • Corporate Bonds
  • Government bonds
  • Structure Notes
  • Certificates of Deposit
• ETNs
• Mutual Funds
• Treasury Bills
• Index Options
• Stock Options
• Futures
• Currency Options
• Derivatives

Types of Listings

The following types of securities are listed on the Tel Aviv Stock Exchange:

• Initial Public Offering (IPO)
• Follow-on Offering
• Dual Listing (usually with Wall Street exchanges - NYSE, NASDAQ or AMEX - or on the London Stock Exchange)
• Private Placements

Regulation

Israel’s single capital market exchange is strictly regulated by the following bodies:

• Bank of Israel
• Legislation: the Knesset
• Israel Securities Authority
• Ministry of Finance
• TASE rules and Regulations

Sources: TASE, Bank Leumi: data as of February, 2016

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Israel's Iron Dome missile defense system

Israeli military companies are ranked among the 100 largest defense contractors in the world, according to weekly American magazine "Defense News". The magazine, that covers security industries around the world, recently published a report of the largest defense companies globally in 2015. There are four Israeli companies among them: Elbit Systems, Israel Aerospace Industries (IAI), Rafael and Israel Military Industries (IMI).

Both Elbit and IAI are public companies traded on the Tel Aviv Stock Exchange in Israeli shekels. Reflecting its technology exporting success, Elbit Systems's stock has gained 51% in the past 12 months.

Unfortunately, Israel has many enemies set on its destruction. So Israel was forced to innovative and develop cutting-edge technologies in the defense and cyber security industries. The world's militaries continue to be impressed by Israel's prowess in defense technology, as recently demonstrated by Israel's Iron Dome missile defense system successfully defending Israeli cities. While some of these technology and defense companies are government-run, some are publicly-held companies with a long list of prestigious military clients around the world, including the United States.

Elbit Hermes 450 unmanned aerial vehicle

Israeli firm Elbit Systems was ranked in 29th place, IAI at 32, Rafael at 45 and IMI ranked 99. Having so many highly ranked defense contractors is unusual for a nation the size of New Jersey,  with only 8 million inhabitants (about a tenth of 1% of the world's population). The ranking was based on 2014 corporate income. Topping the list were American companies Lockheed Martin and Boeing, and arms manufacturer and aviation firm BAE Systems from the U.K.

Defense Minister Moshe Ayalon (left), IAI CEO Joseph Weiss

Israel Aerospace Industries (IAI) makes components, parts, and systems for military and commercial operations worldwide. It has three AA rated shekel-denominated bond series that can be purchased and held in an Israeli brokerage account. The state-owned company consists of BEDEK Aviation Group (commercial and military aircraft support), ELTA Systems (defense electronics), Military Aircraft Group (maintenance and manufacture), Commercial Aircraft Group (executive jets, engineering and hydraulics), and Systems Missile and Space Group. Its defense-related products are sold to about 70 countries, while commercial sales include such diverse customers as British Airways, General Electric, Lockheed Martin, and United Parcel Service.

Amos-4 Satellite

Last month, IAI Israel Aerospace Industries, in its first satellite export contract, sold a high-resolution optical imaging spacecraft to an unnamed government, IAI officials said. IAI developed the successful Amos line of communications satellites, used over the Middle East, Europe and the U.S.

Tel Aviv-based IAI is also introducing an all-electric version of its Amos telecommunications satellite line, Amos-E, which the company said is aimed at a market of customers needing 10-20 transponders to maintain an orbital slot. Amos-E, which IAI Space Division General Manager Opher Doron said could be built in three years, is already being bid in one of several satellite competitions IAI has entered.  Several companies are building all-electric satellites, which offer up to 50-percent weight savings over conventional chemical propellant, allowing customers to add more payload or use the weight savings to secure a less-expensive launch service.

Amos-E, an all-electric version of Israel Aerospace Industries' Amos telecommunications satellite line

Lockheed invested this year for the first time in Israel when it participated in the capital raising stage of Israeli start-up company Cybereason, investing $ 25 million. The American weapons giant seldom invests in start-ups, and this investment was due to the Lockheed's high sensitivity to cyber threats to its systems.

Sources: Calcalist, Tel Aviv Stock Exchange, Space News, Google, Wikipedia

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By Wise Money Israel Analyst

In the past 5 years, the U.S. stock index S&P 500 increased approximately 105%. The Dow Jones Industrial Index returned about 86%. However, during that time period, Israel’s Tel Aviv Stock Index (TA-25) registered “modest” growth of approximately 54%. [The TA-25 doubled and quintupled Wall Street’s performance over the past 10 and 15 years time periods respectively]. The more interesting question is what will does the future hold? Which market will outperform over the next five years?

I believe that the Israeli stock market is more attractive than other developed nations, especially compared to the American stock market that gained considerably in the past five years. Here are three key reasons why investing in the Israeli stock market is a better investment than the American stock market:

1. 1. More attractive P/E Ratios: When comparing Price/Earning ratios¹ between stock markets around the world and other ratios, we can see that the Israeli market is more attractive (cheaper) than the majority of developed nations’ stock markets around the world, and in particular, the U.S. stock market. There are countries with more attractive multiples, but these are developing nations or emerging markets and not developed countries. See the table "Market Indicators By Nation". [Israel's indicators rank it as the 10th best market]

1. Macro-economic indicators support growth: When we look fundamentally at the Israeli economy, there are several indicators that support long-term growth, compared with the other developed nations in the world. For example, Israel’s Debt-to-GDP ratio of 67% compares well to Germany’s higher debt ratio of 75%, 91% in the Euro block, 101% in the United States, and 230% in Japan. In addition, Israel’s unemployment rate is approximately 5.0% [OECD average: 7.4%], GDP is about 3.0%, and Israel’s population growth rate is the second fastest in the world’s developed economies (only Ireland is growing faster). In addition, Israel is characterized by a young population, well-educated (ranking second place globally for percentage of high school graduates, and first place globally for percentage for PhDs). Despite these indicators, the domestic economy is lagging compared to developed countries in per capita income. Therefore, I believe that the local Israeli economy will continue to grow at a faster pace than the developed nations average in the coming years.
2. The ratio of companies’ valuation to GDP. As is well known, in the long-term a stock market’s valuation will move in relationship to certain key indicators. Warren Buffett claimed that the ratio of companies’ valuation to GDP is “the single best indicator for overall stock market pricing.” The table "Capitalization to GDP" summarizes the stock markets pricing valuation as derived from this ratio.
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   As you can see in the graphs here, the ratio between the companies valuation compared to GDP of the Israeli stock market is approximately 0.78, meaning it is priced between “fair value” value and “cheap market” value. On the other hand, the U.S. stock market ratio is 1.27! In other words, the indicator shows that the U.S. stock market is very, very expensive, and we can expect to see a deep correction downward in U.S. indices.

Accordingly, I believe that in the near future, the Israeli stock market will outperform compared to the U.S. stock market, and therefore, we recommend that you increase your exposure to Israeli stocks, and consider closing U.S. stock market positions.

Disclaimer:
This work is carried out based solely on publicly available information. Not all tests were performed to verify the accuracy of the information forming the basis for this. The information may contain errors and subject to changes after the publication of this document. The information contained in this report does not purport to contain all the necessary information regarding the matters contained in it, nor is it intended to be a complete analysis of all the facts and information contained in it. Furthermore, there could be substantial discrepancies between the assessments introduced here and actual results. The editor/author is not obliged to inform the recipients in any way for such changes in advance or after the fact. This document should not be considered a recommendation or substitute's the reader’s own discretion or an offer or invitation to obtain offers, or advice to buy, making investments or carrying out activities or transactions whatsoever. This analysis reflects our understanding on the date of publication of the document. This document is not a substitute for professional advice, including legal advice and therefore you should not rely solely on the information contained in it, and it does not replace independent judgment and receiving professional or legal advice that takes into consideration the special needs of each person. Wise Money Israel, its employees and associates, and anyone acting on its behalf, shall not be liable in any manner for any damage and/or loss caused to the use of this document, if any, unless caused by negligence and/or lack of good faith and/or malice on their part, and cannot guarantee or be responsible for the reliability of the information set forth in this report.
This document is intended solely to qualified customers, as defined in the Regulation of Investment Advice and Investment Portfolio Management Law - 1995. This work is not to be distributed, transmitted, copied or used in any other way without the approval of Wise Money Israel’s prior written consent.

¹ Price/Earning Ratio - dividing the value of the trading company by net profit last year. This test was done on all public companies of the leading indices in each country.

The post Israeli stock market – outperform Wall Street appeared first on Wise Money Israel.

These and other stocks may be purchased in shekels from an Israeli brokerage account, which can be opened remotely from anywhere in the world.

What stocks are on fire?

What individual stocks have outperformed the overall market in 2015 Year-to-Date (YTD)?

Spuntech Industries (67% YTD)

This manufacturing stock's price has increased 67% thus far in 2015, 111% in the past 12 months, and 363% in the past three years. N.R Spuntech Industries is a dynamic developer, manufacturer and supplier of spunlace (hydroentangled) fabric products used as raw materials in various industries. Over 90% of revenues focus on the manufacture of non-woven fabric for industrial wet clamping purposes (hygienic, cosmetic and domestic use). Additionally Spantec products are used as raw material for medical products, and technical products used as raw materials in the automotive, furniture and synthetic leather. 85% of products are exported to Europe and the U.S.

Opko Health (65% YTD)

This biotech stock's price has increased so far in 2015 by 65% and 133% in the past 12 months. One of the 25 largest stocks in Israel, OPKO Health, Inc. is a multi-national pharmaceutical and diagnostics company that aims to establish industry-leading positions in large and rapidly growing medical markets by leveraging their discovery, development, and commercialization expertise and their novel and proprietary technologies. The CEO and Chairman, Dr. Phillip Frost, M.D., was named the Chairman of the Board of Teva Pharmaceutical Industries (Israel's flagship generic drug manufacturer) in 2010.

Unitronics (213% YTD) 

This Israeli technology solutions company's stock price increased 2015 YTD by 213%. Founded in 1989, Unitronics creates advanced technological solutions that serve the automation sector, including automated parking systems and logistic solutions & integration for a diverse range of industries, with particular expertise in automated warehouses and distribution centers.  The company has 200 employees and also offers bonds on the Tel Aviv Stock Exchange.

Rekah Pharmaceuticals (177% YTD)

This Israeli drug company returned to shareholders 177% so far in 2015. Established in 1941, Rekah engages in the manufacture, marketing, sale and distribution of pharmaceuticals, cosmetics, vitamins and nutritional supplements. The Rekah Group is active on all levels: production, research & development, marketing, distribution and retail. The Group manufactures a wide variety of some 280 well-known drugs and employs 650 Israelis.

Nissan Medical (54% YTD)

Nissan Medical Industries, Ltd. is the leading company in Israel, and well known throughout Europe, for manufacturing surgical dressing products made of gauze and non-woven fabrics. The company was established in 1984 and since 1993 it has been traded on the Tel-Aviv Stock Exchange. Nissan supplies most of the local market, proudly supplying to the Israel's world-famous medical centers, the Israeli army, as well as private hospitals and pharmacies. During the past few years, efforts have been focused on expanding export overseas, mainly in Europe, where significant sales growth has been achieved. Shares have risen 54% thus far in 2015, 77% in the past 12 months, and 697% in the past three years.

Upside Potential

Rimoni (13% YTD)

Rimoni Industries, publicly traded only on the Tel-Aviv Stock Exchange, specializes in manufacturing injection molds and in precise injection-molding for the automotive, medical, electronic and agricultural industries. Established over 50 years ago, their thermoplastic injection technology provides a unified plastic manufacturing and assembly turn-key solution. The stock price has risen 52% in the past 12 months and 142% in the past three years. The company currently pays a 14.2% dividend.

The seamless integration of services - from mold design to mold making, plastic injection, assembly, packaging and shipping - enables Rimoni Industries to take full responsibility for quality control, at every stage of the production process, and to provide a one-stop shop for the three step of plastic production: mold making, plastic injection and assembly. Combining all stages of plastic production under one roof provides the company's customers a streamlined process. Rimoni Industries is a family-run corporation managed by the sons of the Company's founder, Mr. Yotam Rimoni. The Company employs more than 300 workers at two modern plants spanning 2,000 sqm and 12,000 sqm respectively, and a new 8,400 sqm plant. It's main client is SodaStream, the successful Israeli flagship home-made soda and beverage manufacturer, which comprises 54% of Rimoni's revenue.

Minrav Holdings (24% YTD)

This real estate development and construction company is one of the three leading firms in the construction field in Israel. Founded in 1969, the stock has been traded on the Tel Aviv Stock Exchange since 1983 and is rated A+/stable. The share price has risen 24% so far in 2015 and 101% in the past three years. The company currently pays a 3% dividend.The firm provides engineering management and execution of construction works in real estate, infrastructure and environmental projects as contractors in the public and the private sectors. The company has a 4 billion shekel backlog of projects. The group is involved in several extremely challenging projects in Israel, including: The Israeli Defense Force's new military training camp city; the Modi'in Latrun train tunnel;

the sea water desalination plant in Ashdod; Terminal 3, parking lots, and bridges at Ben-Gurion International Airport; the Holocaust Museum at Yad Vashem; the Menahem Begin Heritage Center; the Cultural Auditorium in Rishon Lezion; the football stadium in Rishon Lezion; a 110,000 sqm office building in the Government Compound, Tel Aviv; 50,000 sqm of government offices in the Government Compound, Jerusalem; 60,000 sqm of high-tech facilities for Intel, in Kiriyat Gat; 25,000 sqm of high-tech offices on Stonecutters Mountain in Jerusalem amongst others. The group also develops residential neighborhoods in Israel, South Africa, the U.S. and Hungary. Additionally the firm leases and manages yielding real estate assets in the business and government sectors, for use as commercial, industrial and office space. For example, construction of the student dormitories for the Hebrew University in Jerusalem, government offices, the first private prison in Israel, offices designated for long term leasing to high tech companies in Jerusalem and Ashdod as well as commercial and logistic spaces. Minrav also constructs and operates wastewater purification plants and sea water desalination plants. As a pioneer in this field, Minrav has built plants in Netanya, Ramat Hasharon, Beer Sheva and at Ben Gurion Airport. In addition, the Minrav Group has other areas of activity including manufacturing, importing and marketing plastic and PVC products and operating and leasing freezing works.

Sources: Tel Aviv Stock Exchange, company websites, data as of 5/19/2015

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Question: Ran, what are market conditions like now in the Israeli capital market?

Ran: The capital market is doing well in Israel, especially the corporate bond market. We've seen a recovery over the last number of months.

WMI: Your firm currently manages about 250 million shekels in client assets (portfolios and mutual funds). Question: What sectors do you believe will outperform the overall market in the next 12 months?

Ran: In the stock market, we're recommending exposure to the overall market, for example, through the Tel Aviv 25 index. As the recent natural gas discoveries begin to deliver cheap gas to the Israeli economy (and potential gas exporting), lessening its dependence on imported Arab oil, the economy should see a significant boost to GDP, which should help the large Israeli companies' bottom lines.

Interesting Stock Sectors

Question: What stock sectors would you recommend at this time?

Ran: One specific sector that is of interest to us currently is the Israeli banking sector. The major bank stocks are currently  inexpensive on an historical basis. In most cases, their prices reflect a less than 1.0 Price-to-Book multiplier (which generally is a sign of an undervalued banking sector), and historically has led to price increases for bank stocks (in 2003, 2008 an 2011). Their market capitalization is less than their listed equity, a situation which may reflect the market's recent history fears of economic issues or a global financial meltdown. But, the Israeli banks are in an enviably strong financial condition, with strong balance sheets and consistent earnings (unlike their U.S. bank counterparts). The Israeli banks' strong earnings in 2012 is expected to continue into 2013.

Ran: No Israeli bank failed in the global banking/financial crisis of 2008, and Israeli banks didn't fall into the sub-prime crisis because of strong regulation and conservative loan practices (30% down payment, no undocumented loans, etc.). In 2002, when one small bank did fail due to one employee's embezzlement (Bank LeMizhar), the Bank of Israel returned all money to investors.

WMI: Many of our readers are interested in the oil and gas discoveries happening now in Israel. Question: What is your opinion on the Israeli oil/gas exploration stocks?

Ran: These companies now have positive momentum. In April 2013, one of the largest discovery fields is scheduled to start producing gas and selling it to the national electric company and other large industrial companies. These recent discoveries have revealed a huge potential for gas and oil reservoirs in the offshore drilling taking place now in Israel. One of these discoveries was considered the largest discovery in the world in the past decade. [editor: Zury Ilan, Chief Analyst at Cramim, indicates that the future government royalties (before corporate taxes!) from the recent two discoveries alone could pay off all of Israel's national debt]. The revenue alone from these latest two discoveries is expected to add 1% to GDP.

Ran: The initial investments for these drillings are already paid for, and these companies will soon start to show cash flow of billions of shekels. Their risk is lessening (the spotlight now is on quality of execution, and not on whether they will discover or not), and their future earnings are becoming more secure. This could cause their stocks and bonds to increase in price.

WMI: There are a number of good real estate public companies in Israel. Question: Would you buy those at this time?

Ran: I would invest in those companies with diversification in foreign real estate markets. I would buy them as a small percentage of my portfolio: they've done well, but their prices may be a bit high for now. Rather, I would more likely invest in these company's corporate bonds (those with collateral) and focus on those that weren't invested in Eastern Europe's real estate and industry, as those that survived the 2008 crisis emerged stronger. The profitability of these companies isn't high, so there isn't as much upside for their stock, but because of their financial strength, the chances they'll pay their bond obligations is high.

Corporate Bonds

WMI: Your firm is quite expert in corporate bond investing. Question: How do you select the corporate bonds you invest in?

Ran: Cramim invests in corporations that have strong balance sheets and good cash flow. We meet with the firms approximately once every six months in our offices, and ask their management tough questions regarding their future abilities to fulfill their debt obligation. We have our own in-house analysis department that performs independent, objective works of fundamental analysis on each company.

Ran: We prefer companies with strong, specific collateral and bank covenants, and yields higher than the overall Tel-Bond 60 index. After the 2008 crisis, the banks began demanding stronger collateral, making the current bond series more credit worthy than before the crisis.

Ran: Many Israeli bonds are inflation-indexed, ensuring the investor's buying power is keep intact, even if higher inflation begins to development. Israel's current inflation is around 2% annually.

Question: Would you purchase fixed-rate bonds now or inflation-linked?

Ran: We are currently buying less fixed interest rate bonds now, and keeping our bond durations on these shorter. This lessens the chances of price depreciation when the Bank of Israel raises interest rates, and somewhat lessens the impact of inflation erosion. We're also buying variable interest rate bonds (government and corporate) as we may soon see interest rates hikes by the Bank of Israel. We tend to buy a lot of inflation-linked corporate bonds.

Question: How does Cramim view the credit rating agencies ratings?

Ran: The bond ratings provide one indicator on the credit worthiness of a company or bond series. But this is not the only thing we look for. We rely much more strongly on our in-house research to determine future cash flow and the current value of companies. When we do look at ratings, we look in the BBB+ or above region, or we look at unrated bonds with strong collateral (which sometimes offers interesting investment opportunities overlooked by larger investment houses which don't dedicate their research arms to smaller, unrated bond series).

Convertible Bonds

Question: Are you finding interesting corporate convertible bonds in the Israel market today?

Ran: Currently, there are not many convertible bonds in the market that are close to their stock path. Those that do exist are very much out-of-the-money [editor: and therefore give less bond yield without the possible stock upside]. Some are in risky medical/pharma companies where the risk is too high for us to invest in them. There is one convertible bond series from real estate and gas exploration companies that we do invest in.

Mutual Funds

Question: What do you look for in an Israeli mutual fund?

Ran: Look for corporate bond mutual funds (we have three such funds) with good diversification that outperform their peer groups and overall market. These funds have shown outstanding performance in the past year compared with stocks.

Government Bonds

Question: Do you invest in Israeli government bonds?

Ran: Even though yields on Israeli government bonds are relatively low currently, we invest in these bonds to some extent to add a strong anchor to our portfolios to provide stability. As interest rates rise, we also believe these bonds may provide an interesting investment vehicle unto themselves.

Israeli Elections

Question: How have the recent elections affected the capital market?

Ran: There is a positive atmosphere in Israel because of the surprising results of the January elections. The public showed less interest in national political and security issues. Rather, social and economic issues are now beginning to take center stage. The government will now will be forced to take a hard look at high taxes, equal Army service, and other social issues. This may help the middle class and overall economy, as the burden is spread to more market participants, and more ultra-religious persons enter the workforce. Focus on making housing more affordable may succeed in lowering the average cost of living. Also, the left-wing Labor party, which has traditionally represented unionization and resisting tycoons and big money received less mandates (votes). This may produce a more constructive middle class and competitive business atmosphere.

Disclaimer: Cramim Capital Markets clients currently hold positions in the Tel Aviv 25, gas/oil securities and mutual funds, corporate bonds and banking securities.

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