TJP Q4 Newsletter

 

Dear TJP Client:

As the most dynamic economy in the Middle East, Israel continues to create significant numbers of investment opportunities as a result of political, economic, and technological developments so far this year.  Among the most intriguing of these are a result of the historical diplomatic agreement signed between Israel and the United Arab Emirates (UAE) in August 2020.

 

At the diplomatic level, here are some of the most recent developments[1]:

  • On October 20th, Israeli Prime Minister Benjamin Netanyahu met the official Emirati delegation at Ben-Gurion International Airport along with a delegation from the United States. Emirati leaders announced that they will be opening a UAE embassy in Tel Aviv.
  • On October 19th, Etihad Airways, the Emirati flag carrier, flew its inaugural commercial flight to Israel.
  • On October 13th, an Emirati cargo ship from Abu Dhabi, UAE carrying a diverse assortment of equipment, including those used for firefighting, cleaning, and electronics applications docked in Haifa.

 

Israel and the UAE are also extending ties via the private sector[2]:

LeapLearner, an Israeli company specializing in the development of applications for use in education, has opened an office in Dubai, UAE that is bringing 200,000 Israeli and Emirati students to collaborate on developing Python-based applications[3].

 

Sonovia Technologies, an Israeli company manufacturer of SonoMasks, which is a antimicrobial mask that has been shown to destroy over 90% of COVID-19 particles using zinc oxide nanoparticles that are embedded into the masks.  The SonoMask is used in Dubai settings as diverse as dental clinics to hotel services.  To commemorate the historic peace treaty, Sonovia has created masks with the dual flags of Israel and the UAE.

 

Aviation Links, a Tel Aviv-based travel agency has signed a deal with Rixos, which operates hotels in the UAE among other countries.  As many Israelis are curious to see what Dubai and Abu Dhabi look like, Aviation Links is selling package deals to those Israelis who already hold special visas to enter the UAE.  The price for a five-day family package, including stays at either the Rixos Dubai or Rixos Abu-Dhabi plus airfare, start at USD 1,389 per person.

 

Israeli Startup Companies Continue to Innovate during COVID-19

Israeli companies continue to develop products and services to help improve the lives of Israelis by both focusing on citizens’ needs both during the current pandemic and in their everyday lives.

 

 D-ID[4][5] recognizes the challenges that the entertainment industry is undergoing as a result of not being able to produce content in the traditional in-person formats.  D-ID provides two solutions that are related to each other. 
First, the company’s technology enables actors and actresses to manipulate still photos their faces to look realistically like that they are talking, smiling, or making other facial movements.  Second, the company provides technology that prevents other “bad actors” that may attempt to use such facial technologies from manipulating them for nefarious uses.

 

Gabriel[6], named after the horn-blowing archangel, creates an innovative product that helps protects Jewish establishments, such as community centers and synagogues from attackers. 
Founded by Yoni Sherizen, a United-States-born rabbi who now lives in central Israel, Gabriel creates a combined hardware and software package that includes panic buttons to be placed around a site with a fisheye camera that gives policy and security managers a view of the scene.  The price starts at USD 10,000 per year for ten devices and associated services.

 

Purecare Dental[7], uses the science of ozone in manufacturing a coffee machine-like device that is used to keep gums healthy. 
Purecare takes the idea behind the water flosser (first invented 58 years ago) by using ozonizing water before the user applies the liquid to his or her teeth.  The company’s CEO, Eli David, explains that “Ozone, despite being a very good disinfectant material, when it comes in volatile gas form it’s poisonous to the body.  Purecare’s innovation is that we turned it from a gas into watery ozone. The beauty of this, as research shows, is that ozone in a watery phase is completely biocompatible. It doesn’t damage bodily tissue and oral cavity tissue.”

 

The Israeli Economy & The Markets

 

Although Israel has been going through a challenging time with regards to the coronavirus pandemic, the effect on the country’s economy and its financial markets has been relatively minimal.  Israeli equities, like stock markets in general, are forward-looking and do not necessarily represent the current state of an economy.

 

In September, broad Israeli equities, as measured by the BlueStar Israel Global Index (BIGI), underperformed International Developed Equities, as measured by the MSCI Europe, Asia, and Far East Index (EAFE), by a relatively small amount (1.75%).  However, year-to-date through September 30th, BIGI is outperforming EAFE by 9.03%[8]:

 

Israeli technology stocks as measured by BIGITech index, continue, to be the bright star in an otherwise challenging year.  Year-to-date through September 30th,  outperformed broad international indexes[9]:

 


 

The Jerusalem Portfolio Continues Its Strong Performance

TJP hypothetical investment experienced a decline of 5.26% in September, but year-to-date through September 30th has had a positive return of 2.75%.  Looking at longer time periods, a TJP hypothetical investment has had annualized returns exceeding +7% for these rolling periods[10]:

 

 

One of the advantages of investing in TJP is that you get exposure to Israeli companies that are not listed in Israel stock exchanges. 

 

 

Featured TJP Companies:

 

In September, we explored in-depth the top five companies by market value in TJP.  This month we look at another five companies.

 

Novocure (Ticker: NVCR, Market Cap: USD 13.85 Billion, TJP Targeted Allocation: 3.8%):

Novocure is a medical services company that provides patients with cancer therapy treatments called “Tumor Treating Fields,” which use electric fields tuned to specific frequencies to disrupt cell division, inhibiting tumor growth and causing cancer cells to die.

Yoram Palti, a Professor of Physiology and Biophysics at the Israel Institute of Technology founded the company in 2000. The company has nearly 800 employees.[11]

In July 2020, Novocure announced a clinical trial collaboration with Merck & Co. to develop Tumor Treating Fields together with Merck’s anti-PD-1 therapy KEYTRUDA® for treatment of non-small cell lung cancer (NSLCLC).

Novocure’s headquarters is in the island of Jersey, a dependency of the United Kingdom.  Israeli Operations ae located in Haifa.

 

Teva Pharmaceuticals (Ticker: TEVA, Market Cap: USD 10.3 Billion, TJP Targeted Allocation: 3.3%):

Teva, which translates to “nature” in Hebrew, is a pharmaceutical company with dual headquarters in Israel (Petah Tikva) and the United States (Parsippany, New Jersey). Teva is the largest generic drug manufacturer in the world, and one of the largest 15 pharmaceutical companies worldwide.  The CEO of Teva is Kare Schultz, and the company has over 42,000 employees.[12]

In October 2020, Teva announced the availability of the first generic versions of the HIV medications Truvada and Atripla, both of which had patents under Gilead Sciences.  Teva executive Brendan O’Grady said that “during the COVID-19 pandemic, access to treatment is more essential than ever for those who are immunocompromised and at risk of developing more severe disease.”[13]

In September 2020, Teva Respiratory, a Teva affiliate, launched two new products, the AirDuo Digihaler and the ARmonAir Digihaler.  Both of the new inhalers are prescription inhalation powders designed to treat people with asthma 12 years and older. The AirDuo can be used to control symptoms of asthma and to prevent symptoms such as wheezing, while the ArmonAir is designed for the long-term treatment of asthma.  The Digihaler line is equipped with Bluetooth wireless technology that automatically records inhaler-use data every time the cap is opened or a user inhales.

 

Bank Hapaolim (Ticker: POLI, Market Cap: USD 26.6 Billion, TJP Targeted Allocation: 3.1%):

Bank Hapaolim is one of Israel’s largest banks as well as the largest lender bank.  Histadrut, the Israeli trade union congress, and the Zionist Organization established the bank in 1921.  Headquartered in Tel Aviv, Bank Hapaolim as assets of over USD 116 Billion.  The CEO is Dov Kotler.[14]

After diplomatic relations were normalized between the United Arab Emirates and Israel in September, Bank Hapaolim announced that it would begin facilitating direct money transfers between the countries and would help develop trade and business ties.  Such an arrangement can occur as a result of a “correspondent banking relationship” in which a bank with no branch or network in a given country will typically channel payments there through a local bank that acts on its behalf.[15]

 
CyberArk Software Ltd (Ticker: CYBR, Market Cap: USD 4.3 Billion, TJP Targeted Allocation: 2.9%):

CyberArk is an information security company offering focusing on the financial services, energy, retail, healthcare, and government markets.
The company’s global headquarters are located in Petah Tikva, Israel, with U.S. headquarters located in Newton, Massachusetts.

Alon N. Cohen and current C.E.O. Udi Mokady founded CyberArk in 1999 by assembling a team of security engineers who implemented the digital value technology, which surrounds data with eight layers of security within an existing perimeter.[16]

In May 2020, CyberArk announced that it had acquired Idaptive Holdings for USD 70 Million.  With the acquisition, CyberArk and Idaptive will deliver an Identity Security platform, which consists of a comprehensive artificial intelligence-based and security-first approach to managing identities that is adaptive and context-aware.[17]

 

Amdocs LTD: (Ticker: DOX, Market Cap: USD 7.6 Billion, TJP Targeted Allocation: 2.4%):
Amdocs is a multinational corporation that was founded in Israel and currently headquartered in Chesterfield, Missouri.  The company specializes in software and services for communications, media, and financial services providers in digital enterprises.  The C.E.O. is currently Shuky Sheffer.

The company was founded in 1982 in Israel as an offshoot of Golden Pages, the Israeli phone directory company, which was owned by Morris Kahn.  Together with others at Golden Pages, Kahn developed a billing software program for phone directory companies.[18]

 

 

We hope that you have enjoyed reading this quarter’s TJP newsletter.  As always, please take care of yourself, and feel free to contact us for more information.

 

 

Best Regards,

Selwyn Gerber, CPA

Jonathan L. Gerber, CPA, MBT, PFS