Investing in Israeli Brainpower

Goldstein said he's been favoring banks, insurance companies, retailers and chemicals firms.

His top holding as of June 30 was Israel Chemicals. The fertilizer and specialty chemical company is coming off of a quarter in which its operating income soared fivefold as sales more than doubled. Israel Chemicals has benefitted from a surging, global demand for phosphates and potash. The company also maintains a well-balanced product mix.

Investing in Israel does not come without risk. "Geopolitical risk is often associated with Israel," Jasper said. "But it is already priced into the market. Israel has always been resilient in the face of geopolitical risk."

Jasper cites the 2006 Lebanon War as a prime example of this resilience. During the conflict in the summer of 2006, the Tel Aviv Stock Exchange declined by 3.8%. From early September till the end of the year, the exchange rose 16% and added another 23% in 2007.

The weighting of the 70 holdings of EIS are not as evenly balanced as those of a typical mutual fund. TEVA and Israel Chemicals, the top two holdings, account for 37% of the ETF. So a downturn for either could drag down EIS more so than would be the case with a mutual fund.

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