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There are more Israeli companies on Wall Street than from any other foreign country except Canada. That is "old news.". But not many investors are aware of another fact: on the basis of return on investment, Israeli and Israeli-related stocks have been among the leading investments on Wall Street in the last two years.
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Israeli securities on Wall Street have undergone a real revolution. Most Israeli and Israeli-related stocks are well covered by analysts. Leading companies, like Check Point, Mercury, Teva and Comverse are held by leading institutions and can easily pass as regular US companies.
Israeli companies are not new to Wall Street. The first group appeared during the sixties, mainly "brand names," like American Israel Paper and Ampal. Another group went public in the mid-eighties, when the first wave of technology and biotechnology companies appeared on NASDAQ. But not until recently have Israeli securities been treated as any other U.S. security. Until the second half of the nineties, these Israeli securities caught the attention mainly of Jewish investors in the United States, and Israeli investors. American private investors and institutions, and U.S. analysts were not involved with Israeli securities.
This all changed during the second half of the last decade, especially during the last couple of years, after the letter "F" (foreign) was removed from the designation of most of these companies, and the stocks were recognized as the securities of leading companies in their field.
The first and most important is the advance of the technology revolution, which highlighted the leading technologies represented by Israeli corporations. Information transfer, telecommunications, the Internet, fiber optics, biotech, and all the other "magic" names brought interest in Israeli companies to new levels.
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The other key factor is the change in the way Israeli corporations are managed. A new generation of managers, many graduates of U.S. based universities, and people with experience working in American businesses, have obtained management positions in Israel. These young entrepreneur-managers understand "the game." Unlike their predecessors, the new managers learned not only how to create a start-up, but also how to nurse the idea to fruition. The stock performance, and rapid growth in revenues and profits of most of these Israeli corporations are the result of the unique technologies and the capabilities these managers have developed.
It is interesting to note that many of these companies actually had these fantastic technologies, long before their value was reflected in the price of the stocks. Yet, only during the last three or four years did the technology revolution show investors the importance of the Israeli companies' technologies. Israeli technologies became what experts describe as "keys for the advancement of the technological revolution," and, as is always the case, Wall Street "discovered" this ahead of time and gave "dream" values to stocks with these technologies behind them.
In the first half of the nineties, there was almost no foreign investment in Israel; no foreign venture fund showed interest in the country, and the sole representative of the Wall Street brokerage- investment- banking community in Israel was a small New York broker, Oscar Gruss and Son. Today, billions of dollars in venture-fund money are pouring into the country, and every major financial house has representation in Israel. Some of the leading houses, including Robertson Stephens, Hambrecht & Quist, Oppenheimer and others have full service offices in Tel Aviv, while others, like Merrill Lynch, are in the process of establishing branches.
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