An Investment Boom in Israel
Last month, Apple CEO Tim Cook was warmly welcomed in Israel, where he came to inaugurate his company’s new research and development center in Herzliya.
Apple first invested in Israel in early 2012, when it acquired Anobit Technologies, a maker of a flash-memory drive part for the iPhone. Apple went shopping in Israel again in 2013, picking up PrimeSense, a developer of chips that enable three-dimensional machine vision.
The two high-tech acquisitions alone amount to a roughly three-quarter billion dollar vote of confidence in Israel and its future as the “Silicon Valley for the rest of the world,” as London venture capitalist Saul Klein has described the Jewish state.
Apple is in very good company, indeed. Intel, IBM, Google, Cisco, Samsung, and Microsoft are among the more than 300 multinational companies with R&D centers and other facilities in Israel. Recently, both Facebook and Amazon have put down stakes here as well.
In fact, just this past September, Intel got the green light from Israel’s Finance Ministry to pour an additional $6 billion into the company’s chip manufacturing plant in Kiryat Gat. That represents the single largest investment to date by any overseas company in Israel.
“It is extremely hard not to be a bit star-struck by the Israeli technology scene,” observed Ben Rooney, a European-based financial journalist who writes on technology. “Just when you think you have seen everything, along comes something even more impressive…,” he wrote in The Wall Street Journal.
While major multinational companies and venture capitalists have put their faith in Israel’s much-heralded start-up economy for decades, American institutional investors and well-heeled individual investors have been slower to take advantage of the opportunities that Israel and its publicly traded companies represent.
That, too, is beginning to change.
Israel Investment Advisors (IIA), which offers individuals, endowments and other institutional investors the opportunity to participate in the growth and development of the Israeli economy and financial markets, is among a nascent group of American investment advisers looking to help clients navigate the Israeli securities markets.
You no longer have to acquire a company in Israel, or build a subsidiary here, to tap into the nation’s wealth of investment opportunities.
“We think the world will take notice of the Israeli financial markets in the coming years and we are pleased to be among the first to participate,” writes Brian J. Friedman, the managing member of IIA, who also serves as president of GHP Investment Advisors, with $900 million in assets under management.
Friedman and IIA invest in the securities of a diverse portfolio of established Israeli companies with an eye toward long-term wealth creation rather than short-term profits.
The Tel-Aviv Stock Exchange, as of December 31, 2014, listed 540 companies. While Israel’s high technology sector attracts the most foreign investment, American and other foreign investors have a wide variety of economic sectors from which to select. These include agriculture and drip irrigation; defense manufacturing; water desalination and recovery; aerospace, pharmaceuticals and medical device makers; financial services; and environmental sciences.
Israel’s largest trade partner remains Europe, followed by the United States. But the Far East and Asian-Pacific markets hold enormous promise as purchasers of Israeli-made goods, as well as investors in Israel’s capital markets.
“Most of Israel’s exports are high value added and remain in demand in the United States, Asia and many emerging markets,” IIA’s Friedman noted in a December 2014 letter to investors. Over the long run, he forecast that Israel will continue to grow in perhaps the 4% to 5% range annually.
For Israel’s GDP to reach $500 billion – which some analysts, including Friedman, have said is doable by 2022 – the nation will need additional infusions of foreign capital. Israel, despite its perpetual and undeniable security concerns, offers a solid case to overseas investors – a message that is already resonating strongly with American, European, and Asian corporations.
The new R&D center that Tim Cook opened last month in Herzliya becomes Apple’s second-largest such operation in the world. More than 700 Israelis – Jews and Arabs alike – now work in Israel for Apple.
The Apple Herzliya center is one of the most environmentally friendly buildings ever constructed by Apple and one of the ‘greenest’ in Israel, according to David Shamah of The Times of Israel. Solar panels on the roof provide enough energy to supply the entire building’s hot-water requirements; and smart systems that turn off both lighting and air conditioning when people leave the room help cut operating costs significantly, Shamah notes.
“Apple is in Israel because the engineering talent here is incredible,” Cook told his Israeli colleagues. “You guys are incredibly important to everything that we do and to all the products that we build.”
To which all I can add is, “investors take note.”