Road to Israeli Reforms Paved With Gold

Ravid believes that "fundamentally, the Israeli economy is in the best condition it has been for years," despite uncertainly regarding the upcoming election and the victory by Hamas in the Palestinian election. She recommends investing "gradually" in Israeli companies and notes that the areas of real estate and high tech are likely to perform better than others.

Among the dual stocks trading in Tel Aviv and New York, Ravid recommends the real estate company Gazit Globe through its subsidiary REIT Equity One (EQY Quote), NICE Systems (NICE Quote) and Lipman (LPMA Quote). Among the technology companies, he recommends the newly public semiconductor company Saifun (SFUN Quote) and the Internet security giant Check Point (CHKP Quote).

For those interested in tapping into the local market, Ravid recommends shares of the insurance company Clal Insurance, Elbit Systems (ESLT Quote), Teva (TEVA Quote) and Bank Leumi.

Psagot Ofek own shares of the aforementioned securities.

Betting on Banks

In part because of the reform in the pension fund regulation, banks have been perhaps the hottest sector in Israel.

Shares of Israel's big five banks, probably the most liked by foreign investors, have been trading at all-time highs; an index of Israeli banks rose 56% in 2005, and as much as 64% since July, immediately after the reforms were enacted. Ravid opined that despite their price, shares of banks such as Bank Hapoalim, Bank Discount and Bank Leumi are still attractive. In 2005, the banks were trading at roughly eight times their earnings and are now trading at 8.4 times their 2006 earnings, according to Psagot.

The pension fund regulation reform was the engine behind the surge in the banks' shares this year. With record earnings after selling their asset management operations, the banks were able to hand out handsome dividends, sending investors flocking to their shares. Bank dividends averaged 8.2% in 2005.