Deliberating Disclosure

Analyst Michael Kwatinetz calls for a more measured release of company analysis. Also, which funds track Israeli high-tech names?
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Kwatinetz on Disclosure

Credit Suisse First Boston's

Michael Kwatinetz is something of an analyst's analyst: He's a guy who loves crunching the numbers, digging into industry trends and opining on the state of his craft. Join the discussion on


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He's also had a string of critical hits, like backing


(MSFT) - Get Report



(DELL) - Get Report

(he hasn't been alone on either, of course), turning positive on

Apple Computer

(AAPL) - Get Report

at the right time, and presciently withdrawing his long-time support for



long before that story began to unravel.

In his most recent missive to clients, Kwatinetz points his pen toward the sticky issue of disclosure: when it's material, to whom companies should be telling what and the like. He's a big defender of his kind of in-depth analysis, including the "mosaic" method in which researchers who study hard can put together a picture from many minute pieces of information.

"Like the 1970s Russia-watchers in the

U.S. State Department

, analysts sometimes study a company's behavior so deeply that they are able to draw conclusions from lack of a comment or seemingly innocuous statements made by that company," he writes.

Still, despite all the thought he's given the topic, Kwatinetz's conclusion is wishy-washy: Analysts should behave more responsibly and not rush out with reactions to rumors. Otherwise, the

Securities and Exchange Commission

will clamp down on communications between companies and investors, and then no one will be able to get any information.

"There are very few of us left on the Street who provide analysis," he says, yearning for the days when research analysts could ponder a visit with a company for a day or so before disseminating their conclusions to clients.

His solution? First, never allow 24-hour trading. That would make it impossible for investors to digest new data points without having to respond to the actions of other investors instead of the data itself. Second, call on the carpet analysts who are reactive rather than reflective. Third, carefully control the behavior of the press at investor conferences and, by extension, on conference calls, so that reporters who don't understand a company in its context don't rush into print information that can cause absurd price swings in stocks.

Kwatinetz is right that some analysts and some reporters are irresponsible (naturally, he and I exclude each other from our respective lists). But the answer shouldn't be to shut them up. It should be to expose them, as we try to at

. Analysts and reporters who make bad calls won't succeed in the long term. It seems difficult to accept in the here and now, but the bad apples will fall away sooner or later.

I think he's probably right about 24-hour markets, but it's most likely not as much of a threat to information flow as Kwatinetz fears. Most folks are still going to want to trade during daylight hours (when liquidity is better) and have a life the rest of the time.

What he's ignoring, of course, is the conflicted roles of "sell-side" analysts in general. Ideally, they "sell" their research as part of a total package of services their brokerages offer to clients. In reality, analysts have become investment bankers who can write. They promise to lend their support to firms that use their organizations to underwrite initial public offerings and advise on deals. Good analysts, like Kwatinetz, call it like they see it and do it well. But independent, objective observers they simply are not.

How to Play Israeli Tech Stocks

For the many readers who wanted to know if there is a mutual fund that invests in Israeli high-tech companies, the pickings are slim.

The most accessible fund is the

Amidex35 Mutual Fund

, marketed by its creator,

TransNations Investments

in Conshohocken, Pa., and by



. The Amidex35 is based on many of the biggest Israeli companies traded in Tel Aviv and New York. And while it likely is a good way to track the Israeli economy, its exposure to high-tech is limited by investments in industries like banking, real estate and chemicals. More, though the fund is no-load, it's got a stiff minimum investment of $10,000, or $2,000 for retirement accounts.

Another fund that will be of less interest to the high-tech crowd is the

First Israel Fund


, a closed-end fund traded on the

New York Stock Exchange

. Its biggest holdings include banks, conglomerates and telecommunications utilities.

It seems like a no-brainer for some smart fund manager to start a mutual fund comprised solely of Israeli technology shares listed on the


. The definition of "Israeli" gets dicey, but a working definition would include companies with Israeli founders and most of their R&D teams residing in Israel, no matter where the headquarters is now. Therefore,

Comverse Technology


, a new entrant to the

S&P 500

, would qualify.

Applied Materials

(AMAT) - Get Report

(listed in


newspaper as an "Israeli" company because of its operations there) would not.

Adam Lashinsky's column appears Mondays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at