The worldwide selloff in biotech stocks and the lack of performance by generic drug giant Teva Pharmaceutical Industries (TEVA) - Get Report  has hampered Israeli stocks thus far in 2016. Dig a little deeper into the indexes, however, and it's clear that other parts of the nation's economy are gaining momentum, said Brian Friedman, president of Israel Investment Advisors.

"Biotech is a core part of the Israeli economy and it is clearly having its troubles," said Friedman. "But other parts of the economy like retail and finance are doing well and will continue to do well because economic growth stabilized at 2.8%, which is above the U.S. and European growth rates."

The Tel Aviv 100 index is down 6.6% year-to-date while Teva, the largest stock in the index at almost 10%, is down over 19%.

Friedman said his firm is finding value outside of biotech and he is still seeing a valuation discount to U.S. stocks because of security concerns. That said, Friedman said Israeli stocks no longer trade at a discount to Europe and emerging market equities because of the country's growth prospects and stable currency.

Weakness in the U.S. IPO market is affecting the Israeli technology market as well, according to Friedman. More broadly, however, recent legislation to break up conglomerates is creating new companies that have the potential to go public. Friedman said this may rejuvenate the new issue market.

As for the impact of the U.S. presidential campaign on Israeli stocks, Friedman said it is still too early to tell which candidate would be best for the country's economy. Still, he is worried about the presumptive Republican nominee Donald Trump's protectionist rhetoric.

"He has not fully articulated his position, but if he holds true to his stated protectionist positions then Israel may get caught in that net too," said Friedman.