A Unique Business Environment

Another aspect of Israeli society, however, is not as widely celebrated in the western world. These are so called collective communities you may know in Hebrew as kibbutzim. Going back to the founding days of the state of Israel, these essentially socialist settlements focused on a communal life. In time, capitalist elements were embraced by the broader society, and the kibbutz movement began to decline. However, it remains present today and continues making its contribution to the Israeli economy.

Some kibbutzim, originally focused on the agricultural sector. Now, they entered the business world by providing products that stretch far beyond Israel's borders. In fact, there are currently 20 multinational businesses operating on kibbutzim today. One such community is kibbutz Yizre'el. Kibbutz Yizre'el is home to Maytronics Ltd, which serves as its main source of income. Maytronics' specialty is development, production, distribution and technical support for swimming pool equipment, specifically robots for cleaning swimming pools. In addition, it produces alarms for protecting swimmers from drowning and other products for treating swimming pool water. Over the years, the company's products have proved to be very successful. Its robots are currently used by approximately a third of public pools. Globally, they are used in almost half of all private pools.

Innovation In Israel In Action

However, this was not always a case. The story of Maytronics originated back in 1982. A member of the kibbutz saw commercial sense in developing cleaning robots in distant South Africa. He pitched this idea to the rest of the kibbutz to buy a patent and develop it further. At the time, the kibbutz was going through a difficult financial situation. Their combined debt stood at around 125 million shekels. In other words, the kibbutz’s total cashflow was not sufficient to pay the interest. Despite this, the members of the community agreed to Hirsh's wild idea, and forged ahead. Twenty years later, the company went public and is currently traded on the Tel Aviv Stock Exchange.

Earlier last month, Mayronics made history by being the first kibbutz-owned company on Israel’s major stock market index (Tel Aviv-35). The TA-35 consists of the country’s 35 largest publicly-traded companies. Kibbutz Yisre'el is still a majority holder of the company, whose market cap is over 5 billion shekels ($1.6 billion USD) in August. To put it differently, the members of the kibbutz share between themselves a whopping 3 billion shekels. Ironically, Yizre'el is one of the last communities that remains faithful to its socialist founding ideology. Regardless of their position within the community, company corporate ladder or level of income, each member gives 100% of his salary to the kibbutz. In return, each member receives a stipend.

The Kibbutz Makes a Bold Choice

Having said all that, the kibbutz came close to losing this vast wealth. One of the world leaders in the industry approached them with an offer to buy a controlling stake. Nine years ago, in 2011, Hayward's offer of NIS 180 million for a 67% stake, an extremely attractive premium.

The Israeli company's valuation stood at NIS 345 million. Not surprisingly, the kibbutz member said no to this lucrative offer after an emotional meeting . Now, looking back, that decision was wise as Maytronics’ value has skyrocketed. Since then, the company's shares ascended by an amazing 2,600%!

Back in 2017 the kibbutz sold 10% of its shares for NIS 235 million. On August 20, 2020 they sold another 3%, raising the total of NIS 385 million from both transactions. Even after reducing their stake to 54%, Yizre'el remains in control of its flagship company.

This recent event has only reminded its owners that they made the right decision not to sell its stake a few years ago. Especially, as two-thirds of its annual profits is distributed as dividends.

Where Maytronics Stands Today

With the summer period being a busy one for Maytronics, as seasonal private pools sales increase, the company must adjust to accommodate incoming orders. However, this year delivered another boost as Coronavirus pushed people to stay at home. This served as an incentive for those who can afford to build a backyard swimming pool. During the pandemic, as stated by Reuters, demand for pools reached unprecedented levels around the globe. Manufacturers and distributors are scrambling to meet a wave of demand as consumers stay at home and avoid the virus.

Consequently, Maytronics has been enjoying a significantly higher level of sales of its leading product, the pool cleaning robot called "Dolphin". Even with a favorable environment like this year, the potential for growth remains high due to the fact that most of the pools remain serviced manually. According to Maytronic's CEO Eyal Tryber, there are approximately 20 million pools globally that do not have robots at all. Therefore, the company remains optimistic as it sees plenty of room for growth. From 32% of the total market share back in 2010, the company has climbed up to 48% last year.

The company has been exporting its products around the world for many years now. Currently, the European market is the largest in terms of revenue generation (45% of total sales last year). The United States is second (39%), and starting in 2011, the market presence Australia and New Zealand (11%) grows at a steady pace.

 Source: Company presentation

The Company Still Grows In Size And Innovation

Maytronics sells hundreds of thousands of "Dolphin" units each year. But, it is not only robots that keep customers choosing the Israeli firm. Alongside its highly efficient device, the company markets its anti-drowning alarm system together with pool covers. The management takes safety issues seriously and sees it as one of the potential engines for growth. Accordingly, Maytronics had to expand its production facilities beyond its plant at Yisre'el. In fact, there are two more plants – one in La Ciotat in France and another one in the Upper Galilee in Israel. This way the company is able to cope with any increase in demand when needed. Finally, Maytronics does not rest on its laurels. They remain committed to continual heavy investment in its Research & Development to keep its cutting-edge advantage over its competitors.

It is fascinating to see, how someone's idea and perseverance in developing a simple product such as a swimming pool robot, could result in a multinational business that currently exports 98% of its products worldwide. And maybe this is why a firm from a small Israeli kibbutz is managing not only to outgrow its local market, but is now the global leader in its industry.

If you are interested in learning how Wise Money Israel can help you invest in companies like this one, please contact us here.

Sources: Reuters, Calcalist, Globes, Ha'Aretz, Hadassah Magazine

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The post More Than a Virtue – When Patience Pays Off appeared first on Wise Money Israel.

In our previous articles, we discussed why you should invest in Israel. There are many reason for investing in Israel, among them currency diversification, geographical diversification, and the desire to support the Land and people of Israel. Other reasons include participating in the prosperity Israel is experiencing since its rebirth, and enjoying the fruit of a strong and robust economy that weathers the sometimes-stormy global financial climate.

So how can this be accomplished practically? There are three main ways to invest in Israel financially:

1. Investing in Israel’s capital market via Israeli stocks, bonds and mutual funds. This is done by opening an investment account with one of the established Israeli brokerage firms that are members of the Tel Aviv Stock Exchange (TASE). Accounts may be opened remotely through the mail and can be overseen through a secure English online portal, just like a bank account. Citizens of all countries may invest in an Israeli brokerage account as individuals (single or joint), as an organization (for-profit and non-profit) and through U.S. retirement funds with a minimum entry limit of 20,000 Israeli Shekels (approximately $5,000 USD). Some additional information to know about investing in the Israeli capital market:
   1. The TASE provides a wide array of asset types (securities), ranging from Israeli stocks offering dividend payments, to secure Israeli government bonds, through inflation-protected corporate bonds paying fixed quarterly interest payments, to ETFs tracking market indices. These assets are spread over all the major business sectors offered in other markets around the world, including: technology, real estate, industry and manufacturing, communication, biomedical, agrotechnology, insurance, finance and banking, commerce and services etc. Of particular interest is the new oil/gas exploration sector, given Israel’s recent large-scale discoveries of these commodities, and of course the world-renown Israeli high tech sector that has supplied the world with many groundbreaking technologies.
   2. Individual stock and bonds capital gains, as well as bond interest payments, are not taxed in Israel for non-Israeli investors. The Israeli capital market has shown impressive returns over recent years:
      During the economic recovery year of 2009, the Tel Aviv 35 stock index returned 75% to investors, vs. the S&P 500 yield of 24%. Israel’s stock market has outperformed other developed markets by far since the year 2000 showing 184% total return for the Tel Aviv 35 compared to 63% total return for the S&P 500 (as of May 16, 2017). On the bond side, Israeli corporate bonds have yields over 6% average annual return with relatively low volatility since 2009.

2. Investing in Israeli Start-Up companies. This is done by purchasing equity in early stage start-ups as an angel investor or through a venture capital firm that is connected with various private companies and raise capital for them through a VC fund. Some additional information to know about investing in Israeli start-up companies:
   1. Investing as an angel investor or through a VC requires a relatively large investment principle, typically ranging between $150,000 to $2,000,000 USD but typically represents no more than 10% of the investors total investment portfolio. VC investing is usually done by “Accredited Investors”: individuals with a net worth of at least $1,000,000, excluding the value of the investor’s primary residence, or demonstrate an annual income of $200,000 or $300,000 for joint income for the last two years with the expectation for the same or higher income in the future.
   2. Since seed investments in start-ups and VC funds are of a much higher risk nature, investors should be prepared and able to potentially lose all of the principle investment. Start-ups have a success rate of 1 in 10, meaning that there is 90% chance that the start-up will fail and the principle will be lost. For this reason investors usually invest in dozens of start-ups simultaneously with the hopes that one of them will success and provide a good ROI (return on investment) to cover the losses gained from the other failed investments.
3. Investing in Israeli Real Estate. This can be done in two ways: first, by directly purchasing physical real estate such as an apartment, house, building, office etc. Second, by purchasing stocks and/or bonds of real estate companies or Real Estate Investment Trusts (REITs) on the Tel Aviv Stock Exchange. This second method is less direct, i.e. you do not actually own the property but do enjoy the dividends and cashflow from the companies that build, sell and rent out the real estate. These dividends are legally tied to over 90% of the profits of the REIT. Some additional information to know about investing in Israeli real estate:
   1. The Israeli real estate market has seen good growth in since 2007 with prices of many assets rising close to and even over 100% since then, giving an approximate annual return of 7% (varying, significantly even, from asset to asset). Since the end of 2016 the rise in house prices has slowed significantly, with recent data indicating a very possible change in trend to housing prices as they begin to drop, though it is still too early to tell. There is a certain level of uncertainty currently in the real estate market, however some analysts are already determining that investors are beginning to sell their real estate assets.
   2. Investing in REITs and real estate companies put somewhat of a hedge between the investor and the assets, for the better. On the one hand it employs the REIT management and real estate company’s expertise in the market, eliminating the need to for the client to make those decisions and spend all that effort themselves. On the other hand, it is easy for the client to control their level on investment in the real estate market by purchasing or selling more stocks or bonds with the click of a button, without the need for finding a buyer for their physical property and not having to deal with the bureaucracy, taxation, legal work, fees etc. that go with selling (and purchasing) actual property. These advantages allows the investor to change weighting in their portfolio to other market sectors and asset classes swiftly and with minimal hassle, time and money consumption. This flexibility can be key in turbulent market times.

Investing in Israel is a great way to diversify your portfolio, support the Israeli economy and participate in the success of the nation. Before you decide how to do that, you should consider the information above and how that applies to your specific personal and financial situation.

Stefan Silver serves as the Director of Business Development & Operations at Wise Money Israel (WMI), the first licensed Investment Portfolio Management firm in Israel that works completely in English to serve local and international clients. WMI works with hundreds of individuals and organizations from around the globe to invest in Israel’s leading companies and technologies through Israel’s capital market – the Tel Aviv Stock Exchange (TASE).

Stefan holds a B.A.in Economics and Management, and an MBA from Haifa University. Born in Auckland, New Zealand, Stefan immigrated to Israel in 1992 and served for four years in the IDF’s Combat Engineering Corp, including combat experience on the front lines of the Second Lebanon war. He is currently a Captain in the IDF Reserves.

LinkedIn: Stefan Silver

Sources:
Forbes, Investopedia

The post Israel Investment Possibilities Explained appeared first on Wise Money Israel.

"I will make rivers flow on barren heights, and springs within the valleys. I will turn the desert into pools of water, and the parched ground into springs." (Isaiah 41:18)

Modern-day miracles

"The desert and the parched land will be glad; the wilderness will rejoice and blossom. Like the crocus, it will burst into bloom;... Water will gush forth in the wilderness and streams in the desert. The burning sand will become a pool, the thirsty ground bubbling springs. In the haunts where jackals once lay, grass and reeds and papyrus will grow." (Isaiah 35: 1-2,6-7)

Israeli technology

Largest in the Western Hemisphere - Israeli made

Several days ago, IDE Technologies dedicated the largest desalination plant in the Western Hemisphere – a facility that will produce some 190 million liters of water daily for the residents of southern California.

Providing a new source of water in a state that has long suffered severe droughts, the Claude “Bud” Lewis Carlsbad Desalination Plant will be quenching the thirst of roughly 10 percent of San Diego County, according to IDE. Employing advanced pretreatment and seawater reverse osmosis technologies, the plant is able to generate potable water of the highest quality while significantly reducing energy consumption.

The Claude Bud Lewis Carlsbad Desalination Plant in California

The plant, which will be operated by IDE, has created some 2,500 jobs and generated about $350 million for the local economy.

“Since the last major drought here a little over 20 years ago, the San Diego region has worked to conserve water as well as identify new water sources,” said California Assembly Speaker Toni Atkins.

In addition to the Carlsbad facility, IDE is currently part of another 10 projects in the United States and operates hundreds of facilities around the world, as well as three of the four largest desalination plants in Israel, the Israeli firm said.

Leading the world

Israel is considered a world leader in water recycling and has advanced in desalination and recycling water in recent years. According to released statistics, Israel recycles 70 per cent of its waste water and sewage.

IDE’s holds desalination seminars  in cooperation with the Israeli Water Authority, the Israeli Foreign Ministry, the Middle East Desalination Research Centre and the Centre for International Agricultural Development Cooperation in Israel to introduce the participants to modern desalination technologies and to train them in the correct design, operation and maintenance of water desalination plants.

Reverse osmosis in action at the IDE Hadera plant

Their seminars cover topics in both thermal and seawater reverse-osmosis membrane desalination and offered participants practical instruction regarding the operation and maintenance of large and complex desalination plants. Participants also visit the desalination plant in Ashkelon which IDE designed and built.

Israel has desalinization plants not only in Ashkelon (the largest seawater reverse osmosis (SWRO) plant in the world), but also in Sorek, Palmachim and Hadera on the Mediterranean coast. Another is planned for Ashdod.

The Water Revolution

As California and other western areas of the United States grapple with an extreme drought, a revolution has taken place here in Israel. A major national effort to desalinate Mediterranean seawater and to recycle wastewater has provided the country with enough water for all its needs, even during severe droughts. More than 50 percent of the water for Israeli households, agriculture and industry is now artificially produced.

A pool overlooking the Ramon Crater at the Beresheet hotel in the Israeli Negev desert

With its part-Mediterranean, part-desert climate, Israel had suffered from chronic shortages and exploitation of its natural water resources for decades.

Israel has long sought solutions to the threat of drought. Commercial desalination began in the 1970s in the city of Eilat, on the Red Sea. The first desalination technology used there, in a short-lived pilot project, froze water to remove the salt, then melted it to make fresh water.

But Israel seriously embraced desalination in the late 1990s, after a particularly bad drought. The government then decided to build five new plants along the Mediterranean, as fast as it could.

The natural fresh water at Israel’s disposal in an average year does not cover its total use of roughly 525 billion gallons. The demand for potable water is projected to rise to 515 billion gallons by 2030, from 317 billion gallons this year.

The turnaround came with a seven-year drought, one of the most severe to hit modern Israel, that began in 2005 and peaked in the winter of 2008 to 2009. The country’s main natural water sources — the Sea of Galilee in the north and the mountain and coastal aquifers — were severely depleted, threatening a potentially irreversible deterioration of the water quality.

Measures to increase the supply and reduce the demand were accelerated, overseen by the Water Authority, a powerful interministerial agency established in 2007.

Desalination emerged as one focus of the government’s efforts, with four major plants going into operation over the past decade. With the fifth Ashdod facility, they will produce a total of more than 130 billion gallons of potable water a year, with a goal of 200 billion gallons by 2020.

A desalination plant was dedicated a number of years ago in Hadera. Among the largest of its kind in the world and the third largest in Israel, the plant uses reverse osmosis technology, which means the sea water does not have to be heated, as is done in larger plants in the world that are less environmentally friendly. The entire process of desalinating the water takes 35 minutes from the time it enters pipelines in the sea.

The mammoth plant covers more than 18 acres and actually is two facilities that can operate independently from each other. Together, they can provide 127 cubic million liters, or 33 million gallons a year.

Recycling wastewater

Israel has, in the meantime, become the world leader in recycling and reusing wastewater for agriculture. It treats 86 percent of its domestic wastewater and recycles it for agricultural use — about 55 percent of the total water used for agriculture. Spain is second to Israel, recycling 17 percent of its effluent, while the United States recycles just 1 percent, according to Water Authority data.

Nana vineyard

As an example, the Nana vineyard, which, like many others in Israel, is irrigated with recycled wastewater. Israel has become the world leader in recycling and reusing wastewater for agriculture. It treats 86 percent of its domestic wastewater and recycles it for agricultural use — about 55 percent of the total water used for agriculture.

How can I participate in this success?

How can an investor profit from Israel's prowess in water technology? A number of the private companies in the water technology space are owned by a few publicly-traded companies on the Tel Aviv Stock Exchange (TASE). You can own a part of these companies by buying their shekel-denominated stocks on the TASE. IDE Technologies, for example, is owned equally by Delek Group and Israel Chemicals, Ltd. (ICL).

ICL, whose stocks are sold on the TASE, is a multi-national manufacturing concern that develops, produces and markets fertilizers, metals and other special-purpose chemical products. ICL also owns Larnaca Desalination Partners, a large Cyrpus desalinization plant operator, which IDE built. Additionally, ICL  owns many other chemical companies, including those extracting precious minerals from the Dead Sea (such as Dead Sea Works, Dead Sea Magnesium, Inc. and Lianyungang Dead Sea Bromine Co.).

The Delek Group, one of Israel's largest investment and holding companies, is one of the large cap components of Israel's leading stock index Tel Aviv 25 (comparable to the Dow Jones Industrial Average on Wall Street). It also offers corporate bonds for purchase. Delek Group is involved in  energy and infrastructure, with investments in upstream and downstream energy, water desalination and power plants. Subsidiaries Delek Drilling and Avner Oil Exploration own large portions of the recently discovered Tamar and Leviathan Israeli natural gas fields, which recently made Israel a world-player in the energy market.

Sources: Wikipedia, edie.net, IDE Technologies, New York Times ,water-technology.net, BibleDiscovered.com, GreenProphet.com, Embassy of Israel

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