The Standard & Poors (S&P) credit rating agency upgraded its credit rating for Israel from A+ to AA- (stable outlook), ushering Israel into an exclusive group of 15 nations that hold the prestigious AA ratings (AA+, AA and AA-). The upgrade was announced on Friday, August 3^rd after S&P changed its outlook for Israel’s economy from “stable” to “positive” approximately one year ago.

This upgrade represents the highest-ever credit rating given to Israel by S&P or any other credit rating agency in the history of the nation and comes one month after Moody’s credit rating agency also raised its outlook for Israel from “stable” to “positive” in July 2018, indicating an upgrade in their rating from A1 to Aa- in the coming 12-18 months.

S&P explained its decision by stating that “Israel has demonstrated sound economic performance since the global financial crisis, with a current GDP of about $140 billion (or 50%) larger than in 2010, the current account in a sustainable surplus, and unemployment at historical lows,”.

They also added that despite Israel’s political situation being “highly fragmented” and the public debt remaining relatively high, “we now think that fiscal slippages leading to a significant reversal of the debt path are unlikely. This is based on our belief that, absent global trade shocks, Israel’s economic growth outlook will remain solid and allow the government to accommodate pressures coming from social and infrastructure spending, as well as a potential moderate escalation of security risks”.

Prime Minister Benjamin Netanyahu praised the upgrade, stating: “These decisions reflect the strength of the Israeli economy and the correct and responsible economic policy that we are leading on behalf of Israel’s citizens”.

After being at the helm of Israel’s economy since 2015, Finance Minister Moshe Kahlon also expressed his satisfaction from the S&P upgrade. "In the past three years, the Israeli economy has soared to the best macro data in its history. The confidence expressed by the strongest economic bodies in the world allows us to continue to grow the economy and to help reduce social gaps and strengthen the middle class and weaker sectors. The increased rating of AA- will save us billions of shekels in financing expenses, which we will redirect to the health, education and welfare ministries.” He said, optimistically adding "Although now it is double-A minus, this minus will disappear in a year".

Moody’s stated two main reasons for its outlook upgrade last month, one being recent positive trends in Israel’s government debt and the second Israel’s robust economy.
"The general government debt ratio has declined by more than 10 percentage points since the last upward move in Israel's credit rating in 2008 to around 60% of GDP, reflecting in part a prudent budgetary framework and a robust growth performance. This contrasts sharply against trends in many other advanced country peers both before and after the global financial crisis. For example, Israel is one of only a handful of advanced economies (including Norway, Switzerland and Singapore, which are all rated Aaa with a stable outlook) with a lower debt to GDP ratio today than before the global financial crisis. Furthermore, central government deficits have remained below 3% of GDP over the past 4 years, despite repeated upward revisions of the government's own deficit targets."

"The second driver of the decision to assign a positive outlook is Israel's increasingly resilient economy, supported by the dynamism of the high tech sector, increased energy independence and a strengthening external position, which, if sustained, will continue to support more favourable growth rates than similarly rated peers,".

Finance Minister Kahlon reacted to Moody’s outlook upgrade, stating “The rating outlook upgrade is further evidence of the strength and stability of the Israeli economy. All the data indicate that the economic policy that we are pursuing, including a free and responsible economy alongside strengthening the middle class and poorer sections of society, is the right way”.

Credit rating agencies base their ratings on the governments ability to repay its debts, but also heavily consider geo-political, macroeconomic and other strategic factors pertinent to each country, often comparing between peer countries. The ratings given by S&P, Moody’s and Fitch are the most prominent indicator of a country’s economic situation and are used to evaluate investment opportunities of many types. A higher credit rating expresses confidence in Israel’s economic policies and its future, and will allow the government to finance at lower costs.

Because of the credit rating upgrade, Israel’s capital market reacted positively with significant gains on Sunday, August 5^th, seeing the largest indexes, Tel-Aviv 35 and Tel-Aviv 125, rising 1.69% and 1.55% respectively by the end of trading. This is the highest level the market has been at in almost three years. The Shekel also strengthened 0.5% against both the USD and the Euro due to the upgrade.

Looking ahead, S&P analysts predict an average year over year GDP growth of 3.3% between 2018 and 2021, resulting from private consumption, corporate investments and strong performance in the high-tech and fields of service exports.

Sources:

Wise Money Israel, The Times of Israel, Calcalist, Globes, Jerusalem Post, Ynet

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For decades Israel’s high-tech start-up scene has been considered one of the most exciting and impressive in the world, on par with Silicon Valley, and producing game-changing technologies that continue to push the innovative envelope. Israel ranks #2 for venture capital availability, and is ranked #3 in the world for innovation[1]. With over 3,500 start-ups (mostly in hi-tech), there are more start-up companies in Israel than in any country in the world per capita, and only second to the U.S. in absolute terms[2].

In a statement, Israeli Prime Minister Benjamin Netanyahu said that “Israel is a nation that sanctifies innovation. We’ve achieved great heights, but we cannot stop now; we want to continue climbing.” [3]

In Israel, the publicly traded market of stocks and bonds, aka the Tel Aviv Stock Exchange (or TASE), is completed separated from privately owned companies, including start-ups in their initial stages of funding. This has limited the ability for investors around the world to gain exposure to Israeli start-ups rapid growth and frequent exit successes, and at the same time prevents the flow of much needed capital into the developing start-ups. As a result, many young Israeli start-ups end up being purchased by foreign companies causing the technology, manpower, jobs and overall economic value generated from Israeli high-tech start-ups to leave the Israel market.

However, change is in the wind as Israel’s financial decision makers are formulating means to make these Israel tech start-ups investable by large and small investors alike.

The Israel Securities Authority (ISA) is in the final stages of approving new financial instruments that will benefit both investors and start-ups alike, allowing investors to gain exposure to Israeli high-tech start-ups on the one hand, and start-ups to raise more capital on the other, serving as an incentive to keep Israeli tech in Israel. One of these instruments are closed-end mutual funds that will be fully traded on the TASE and open to all investors, both institutional and private.

These hybrid funds will invest part of their assets in Israeli private start-ups pre-IPO, and part of their assets in publicly traded Israeli tech firms already traded on the TASE. This will provide wide access to the excited world of Israeli innovation, while reducing the risks and high barriers of entry currently experienced by non-accredited and smaller investors. It also offers regulatory oversight and transparencies to these start-ups, as is standard with Israeli publicly traded companies.

The ISA plans to roll out four closed-end high-tech mutual funds with a minimum of 400 million NIS per fund (approximately $115 million) towards the end of 2017 and into 2018. The TASE states that “these funds will be entitled to invest up to 30% of the capital raised in non-traded financial assets, which may be adjusted to 50% in the future should investors be granted government guarantees to mitigate investor risk. At least 5% of the sum raised will be invested by the fund manager. The funds will be able to operate as fixed-term funds limited to a life span of 15 years.”[4]

Additionally, the State of Israel will offer loss protection for the investments in private growth companies up to 20% of the investment and will also guarantee debt raising of up to 25% of the funds size. This governmental backing signals their commitment to both the start-ups and to investors, giving a strong tailwind to the move.

Besides offering exposure to both public and private companies and gaining significant government incentives for investment, these funds will be fully liquid and transparent as with all the securities traded on the TASE.

The TASE is currently undergoing very positive structural and strategic upgrades which it estimates will “enhance competition in the capital market and attract new members from Israel and abroad. It is expected to benefit investors by rendering TASE more prominent and accessible to the public”[5].

Currently, investing in Israeli stocks and bonds through the TASE is the most secure and accessible way to invest in Israel, and with these upgrades coming, it will be all the more so.

[1] World Economic Forum, 2017-2018 Edition

[2] Israel21c.org

[3] nocamels.com

[4] tase.co.il

[5] tase.co.il

The post Israeli High-Tech Start-Ups Investable Through Tel Aviv Stock Exchange appeared first on Wise Money Israel.

When author Mark Twain visited the Land of Israel (then still called Palestine) in 1867, he penned impressions of what he witnessed in his book “Innocents Abroad”:

“A desolation is here that not even imagination can grace with the pomp of life and action. We reached Tabor safely. We never saw a human being on the whole route.  There is not a solitary village throughout its whole extent – not for thirty miles in either direction. ...One may ride ten miles hereabouts and not see ten human beings. ...these unpeopled deserts, these rusty mounds of barrenness...”[i]

In conclusion Twain claimed that “Palestine sits in sackcloth and ashes.... desolate and unlovely...”[ii]

Others described the land as “desolate and roamed through by Arab bands of robbers”[iii], “nothing but houses in ruins, cisterns rendered useless, and fields abandoned”[iv] and even late in the 19^th century a French traveler wrote that Haifa “can be crossed in five minutes”[v].

The picture is clear: a mere 100 years ago, the Land of Israel was desolate of people and of buildings, and villages that did exist were comprised of small, rural shacks. That is certainly not the scene that travelers arriving in Israel today first lay eyes upon.

“Though you were ruined and made desolate and your land laid waste, now you will be too small for your people, and those who devoured you will be far away. The children born during your bereavement will yet say in your hearing, ‘This place is too small for us; give us more space to live in.” - Isaiah 49:19-20

Construction in modern day Israel is booming, with apartment buildings, malls, hotels, highways, interchanges and high-rises springing up all over the country, like mushrooms after the rain. Today, Israel boasts over 750 skyscrapers that are 20 floors high or more – hardly a desolate wasteland with barely a village for “thirty miles in each direction” Israel is now a thriving and developed nation, constantly growing and building at an exceptional rate.

Especially notable is Israel’s largest city of Tel Aviv, where dozens of new corporate office buildings and luxury apartment buildings can be seen rising from the Ayalon freeway as it curves through the city. Major construction can also be seen in Kfar Saba, Kiryat Gat, Herzilya, Hadera and Rosh HaAyin with each city’s construction growth rate rising considerably compared to the same quarter last year by 309%, 260%, 114%, 109% and 100& respectively[vi]. The rise in construction is also reflected in Israel’s House Price Index which hit an all-time high in May of this year, up 114% in the past 10 years.[vii]. Israeli real estate prices even continued to rise during the 2008 global financial crisis, with no sub-prime or mortgage-backed securities setbacks.

Israeli real estate is seen by many as a solid and long term investment. However, purchasing real estate here requires a large amount of initial capital, comes with high entry and exit high fees (lawyers, bank fees, agents, taxes, etc.) and the investor must endure a hefty amount of bureaucracy. Property management from abroad is difficult, and unfortunately there aren’t companies here that offer that service to individual investors. Another disadvantage is the illiquidity of the funds used to purchase the real estate, and in times of need are difficult to obtain speedily without suffering significant losses.

That being said, there is a very practical way for investors to gain exposure in their global portfolios to Israel’s real estate market, and at the same time bypass the disadvantages that come with purchasing actual real estate. This is accomplished through purchasing real estate stocks and bonds in Israel’s financial market. The $5,000 investment brokerage account minimum allow the small and mid-size investor to have income-generating Israeli real estate in their portfolios that generate regular dividends.

There are several different options for purchasing real estate stocks or bonds on the Tel Aviv Stock Exchange:

1. A REIT – Real Estate Investment Trust – buys, develops, manages and sells rental real estate assets and real estate loans (mortgages).  Its professionals manage a portfolio of real estate properties that generally include commercial rental properties (such as shopping centres, office buildings, hotels, industrial buildings, etc.) that return rental income for shareholders, typically through large dividends and long-term capital appreciation. This type of specialized company offers shareholders ownership of real estate through the purchase of stock. Investing in a REIT stock versus the direct purchase of real estate has become a popular way for individual and institutional investors (pension funds, mutual funds and insurance companies) to easily gain exposure to the real estate market. REITs have been operating in the United States for small to medium investors since the 1960s, and together are worth hundreds of billions of dollars.There is are a number of publicly-traded REIT investments on the Tel Aviv Stock Exchange. ”REIT 1” operates as a real estate investment trust with a property portfolio that includes office buildings, commercial spaces, and industrial properties. REIT 1’s stock price has risen by over 180% during the past five years and currently holds an impressive market capitalization of 1.88 billion NIS (approx. $500 million USD)[viii]. REIT 1 is purchasable either through direct stocks or corporate bonds. Sela Capital, another Israeli REIT, has returned 25% to investors in the past 12 months. Another REIT, focusing on residential real estate, had an IPO this month.
2. Stocks and bonds of individual construction companies and/or indexes that track the Israel real estate sector. For example the Tel Aviv Real Estate 15 index includes stock in the largest 15 real estate companies, including the Azrieli Group, Alony Hetz Properties & Investments, Airport City, Africa Israel Properties and Shikun & Binui. The index has risen 18% YTD and has gained approximately 90% over the past five years[ix].

It is amazing to see how Israel has transformed from a desolate, desert, swamp land into the established built-up land that it is today. It is nothing short of a miracle. According to the Scriptures, looking ahead we can foresee that this modern-day, “nation born in a day” miracle will continue to grow and thrive. If you desire to take part in building up the Land of Israel, literally, by investing in Israeli real estate, you now know that there is a simple and accessible way to own Israeli land and real estate without the hassles of purchasing it yourself.

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

[i] Mark Twain, The Innocents Abroad

[ii] Ibid

[iii] Brockhaus, Alig. deutsch Real-Encyklopaedie, 7th ed. (Leipzig, 1827), Vol. VIII, p. 206

[iv] Count Constantine F. Volney, Travels Through Syria and Egypt in the Years 1783, 1784, 1785 (London, 1788), Vol. 2, p. 147

[v] Brother Lievin de Hamme, Guide indicateur, Vol. Ill, pp. 163, 190

[vi] Globes

[vii] Israel Central Bureau of Statistics

[viii] Tel Aviv Stock Exchange

[ix] Ibid

The post Building a Nation: Israel’s Booming Real Estate Market appeared first on Wise Money Israel.

An enormous number of inventions and innovations have come out of Israel in recent decades, more than from many larger, established nations combined. Israel is shining its light on the nations of the world.

Why are there are so many Israeli inventions? Some hints to this mystery might come from the fact that its population seems to be very creative and entrepreneurial.

Innovation involves change for the betterment of mankind, keen observation, thinking outside the box, systematic investigation and serendipity.

Israel has world-leading innovative companies in the fields of technology, transportation, information and communication, food and agriculture, medicine, surveillance and satellites, water, renewable and alternative energy, and security.

Today we’ll focus on a two areas of Israeli innovation - information technology and self-driving cars, and highlight the companies leading these innovations.

Lightning fast Internet speeds

There’s a new game-changing technology called G.Fast which is capable of providing incredibly fast internet over the wires you already have in your home.

Earlier this month, Israeli semiconductor company Sckipio announced a new G.Fast solution that can deliver both upload and download speeds of 750 megabits per second. That's 50 times faster than the broadband many have in their homes today.

But even that speed will be slow in comparison to the next generation of chips that could come within another year. These will provide double that speed for both upload and download (1.5 gigabits per second), Sckipio said. That's faster than anything Google Fiber offers today.

Previous demonstrations of G.Fast have shown the technology to be capable of 750 megabit download speeds, but upload speeds were significantly slower than that.
Equal upload and download speeds are becoming more important, as new technologies require increasingly fast upload bandwidth. Uploading 4K videos, using virtual reality or playing video games all require super-fast upload speeds to function properly. For example, uploading a 30 second 4K GoPro video would normally take five hours using today’s broadband technology, but using G.Fast, it would take only a few minutes.

Sckipio says the G.Fast technology will debut in the United States in 2016. It won't be available everywhere immediately, but Sckipio said a single phone company could roll it out to the entire country in just four years.

Phone companies are excited about G.Fast, because it allows them do deliver super-fast speeds without having to dig up holes in your yard to do it. Or, if you live in an apartment building, they can use the existing infrastructure to deliver fast speeds without having to rewire the entire building.

Multi-dwelling units like apartments are a particularly attractive target for phone companies. Many of those apartments are currently served by DSL Internet over phone lines. But that old technology is dreadfully inefficient: DSL can lose up to 90% of its speed by the time it gets to your modem. G.Fast loses just 5% to 10% during the same trip.

It also solves a problem of deploying fiberoptic cables everywhere, which was previously the only way to get super-fast internet speeds to customers. Bringing fiber to homes is expensive and time consuming (and sometimes requires a company to dig up your yard). Bringing fiber from the street to just to one home can cost $100,000, according to Sckipio.

By comparison, the boxes on the street that need to be installed to power G.Fast cost about $70,000. And the cost of bringing that to your home is $0, since it connects to the phone lines already installed in your house or apartment.

Founded in 2012, the Ramat Gan, Israel-based company with 50 employees develops award-winning standards-compliant G.fast modems, which offer better performance over existing copper wires by dynamically allocating the bandwidth in each direction in real time (Dynamic Bandwidth Allocation, DBA).

Self-Driving Cars

The race is on to get the world's first self-driving car on the road, and the world's biggest car brands - BMW, Tesla and Audi - have all turned to Mobileye, a cutting-edge Israeli start-up.

13 major car companies are all using the technology developed by Israel startup company Mobileye. The company started as a tiny startup, and boasts the biggest IPO in Israeli history (valued at $5.3 billion).

The native Israeli firm, which makes computer vision software and cameras that help cars avoid accidents, offers systems that include a windshield-mounted camera that takes pictures of what is in front of the driver. The images are processed and, in real time, a small device on the dashboard gives the driver audio-visual warnings.

The tiny camera is designed to prevent death and accidents by interpreting a scene in real time. The camera has its eye on the road when driver’s eyes may not be. The software application links to the steering system, and sounds an alert when the driver does something that may lead to a collision. It identifies cyclists and pedestrians, and sounds an alarm before a collision happens. It can also see speed limit signs and whether the driver is veering out of his lane, the first sign of driver fatigue.

The system allows the driver to make a mistake, but brings their attention quickly back to the job at hand. Australia is currently performing a trial of the system using its government vehicles. The technology can be retrofitted easy to any vehicle.

Now the firm is re-engineering the system to allow the driver to take their hands off the wheel. The key innovations are in the microchips Mobileye develops, and in the algorithms the system uses. “In addition to preventing collisions, the system must sense the road in great detail, including lane markings, curbs, barriers, obstructions, recognize a large vocabulary of traffic signs and red lights, determine cars distances, and be fault-tolerant to a degree unparalleled by today’s driver assistance systems,” says company Co-founder, CTO and Chairman, Professor Amnon Shashua.

One day this technology will likely allow us to take our hands off the wheel, and let a sophisticated computer system that never tires or makes driving mistakes, assist us to arrive safely at our destination.

How can I participate?

Some innovative Israeli companies are investable only via venture capital firms offering tens of millions of dollars to viable startups. But other Israeli innovations are developed by Israeli companies already listed on the Tel Aviv Stock Exchange. Israelis and non-Israelis alike - irrespective of residency and citizenship - may open a shekel-based investment account at Israel’s largest brokerage firms, and invest in these publicly traded companies directly in the Israeli shekel. Individuals, companies, organizations and U.S. retirement accounts may open accounts, enabling them to invest in Israeli stocks, bonds and mutual funds.

Sources: MarketWired, CNN, 9news, Mobileye

The post Israeli Innovation – Changing the World 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

The post Profit from Israel’s Desalination Tech appeared first on Wise Money Israel.

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.
   [TABLE=32]
   

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   click to enlarge

   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:
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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.

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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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