Two small Israeli shares which I hold in my portfolio tracked by "Globes"- Nova Measuring Instruments Ltd. (Nasdaq:NVMI; TASE:NVMI) and chip inspection company Camtek Ltd. (Nasdaq: CAMT; TASE:CAMT) - each reported new multi-million dollar orders last week. The news sent their shares jumping.
Since the beginning of the year, the shares have posted strong returns - 56% for Camtek, and 25% for Nova. The continuation depends on the investment budgets of their customers, the chip makers. Those customers are relying on a pace of orders from the makers of telephones, computers, and assorted gadgets, who in turn hope that the price of oil doesn’t lead to a drop in consumers' appetites for the most advanced devices.
For the chip sector, the year 2011 began with the well known disagreement from as far back as the summer of 2010, which is essentially about whether or not we are at a cyclical peak in investment in equipment.
Those analysts who believe that we are at a peak recommend getting out of chip equipment stocks, and those who see growth continuing in 2012 as well suggest buying shares which have not yet reached their full potential for gains.
Goldman Sachs says that there is a risk that the world's biggest chip maker, TSMC (Taiwan Semiconductor Manufacturing Company), will soon cut its annual investment budget following weakness at its customers that Goldman forecasts in the second quarter. That can lead to a drop in equipment shares.
On the other hand, Barclays says that the industry's prosperity is expected to continue next year as well, and among the big companies they recommend shares of Lam Research, ASML Holding, and Applied Materials. They also recommend Corning, the maker of glass for television and gadget screens.
Fundtech
For someone looking for a share of a small and unique Israeli company, but one that is uninvolved in the headache of demand trends in the chip or telecommunications sectors, should look into Fundtech Ltd. (Nasdaq: FNDT; TASE: FNDT). Its share is the only one in my portfolio which has lasted an entire decade, since March 2001, despite all the upheaval in the world since then, including at the company itself.
The share has yielded a return of almost 190%, compared with Nasdaq's 13%.
Israel is not, and never will be, a world financial center, like Switzerland, for example, since from a geopolitical standpoint recent events prove that we are really in the eye of the storm, and the countries around us are in various stages of upheaval of one sort or another.
Despite this unimpressive starting point, Fundtech founder and CEO - since day one - Reuven Ben Menachem succeeded 18 years ago to set up a company that became over the years a small empire in the field of software solutions for electronic payments, clearing, and real-time payments.
The company provides solutions to more than 1,000 banks across 70 countries, including Citi and HSBC.
Two weeks ago I was at a company presentation at the Tel Aviv Stock Exchange (TASE) building, given by Ben Menachem and chairman Avi Fischer, a representative of IDB Holding Corp. Ltd. (TASE:IDBH) which owns about 56% of the company's shares. The presentation, even though it was not said outright, convinced me that the company intends to significantly grow the company over the coming years, by organic growth or by acquisitions, but does not intend to sell it to one of the global giants in the field, or to take it private by an offer to the public.
I point that out because in the past, when the share hovered around the $18 mark, and dropped back quickly, I later understood that the owners had an offer to buy the company by one of its competitors, ACI Worldwide, which they turned down.
Fundtech's business model is one which gives it, through annual maintenance and service contracts, very good visibility on revenue - about 75-80% for the full year, in January already.
If big banks implement its solutions, then hundreds of small banks prefer to lease its software as a service - SAAS in professional jargon, or what were called hosting services in the past. Today, its trendy to call this cloud computing, so that Fundtech can really be called a pioneer in the sector, which has begin to attract big attention.
In a display of optimism, Fundtech's management will begin to a pay a dividend at a rate of $0.40 per year, a yield of 2.2% based on a price per share of $18.
Published by Globes [online], Israel business news - www.globes-online.com - on March 8, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011