Israeli Stocks Dig Peace

U.S. investors looking to cash in on Israel's peace dividend needn't look beyond the Nasdaq and the NYSE.

Peace talks between Israel and the Palestinians have spurred a rally on the Tel Aviv 100 index, bolstering interest in Israeli stocks worldwide. For now, people stateside have limited options for tracking the broad Israeli market: There's the tiny (BWFAX)Blue & White fund, the (AMDEX)Amdex35 Israel fund and the closed-end First Israel (ISL)fund.

But there is no shortage of Israeli companies trading shares in the U.S., led by drugmakers Teva (TEVA) and Taro (TARO), and technology companies Amdocs (DOX), M-Systems Flash Disk (FLSH), Marvell Technologies (MRVL), Nice Systems (NICE) and Given Imaging (GIVN).

Though these companies share most obviously a link to Israel, fans say investors should look at them because of their strong growth prospects and solid management. Those factors can outweigh the risks that many investors associate with sinking money into Israel, with its contentious political and security situation.

"Judging by the increase in the volume of Israeli shares traded in the U.S., I believe there is optimism wirth respect to Israel," says Robert Goldman, chief investment officer of the Blue & White fund.

Indeed, Richard Watson, an analyst at William Blair & Co. who tracks the generic drugmakers, says investors looking two or three years out should take the time to check out Taro's books. To be sure, the company has suffered some recent setbacks, namely a July 2004 earnings shortfall that knocked the stuffing out of the stock. Taro lost two-thirds of its value at one point in 2004 before staging a late-year rebound, but now Watson says it has taken steps to get back on the right track. "They are doing a lot of things that are painful now but will be useful in the long run," he says.