NEW YORK (TheStreet) -- Israel's economy is predicted to grow well over 3% in 2015, far more than that of most developed nations, and its stock market is far outperforming the S&P 500 so far this year. Still, Israel remain one of the least understood investment opportunities, according to Steven Schoenfeld, chief investment officer for BlueStar Indexes.
"You have world-class companies but because of where Israel is located, whether it's the geography ... or whether it's the benchmarks, most investors do not have enough exposure to Israeli companies," said Schoenfeld. "You have world leaders in pharmaceuticals, technology, industrials and even in smart consumer products like SodaStream (SODA) or CeasarStone (CSTE) in your kitchen."
The Market Vectors Israel ETF (ISRA), which tracks Schoenfeld's BlueStar Israel Global Index, is up 11.7% for the year to date compared to a rise of 3.4% for the S&P 500. Generic drugmaker Teva (TEVA) makes up 12% of the BlueStar Israel Global Index, a far smaller weighting than in most other indexes because Schoenfeld caps any single stock at 12.5%.
"Teva is a world leader and a pioneer in genetics and it now has a number of its own drugs," said Schoenfeld. "There is a little bit of pharma drama right now with Teva looking to acquire Mylan (MYL). We will see what happens. I think they most likely will succeed."
Cyber security stocks weigh heavily on the Israeli economy and its indexes. Check Point Software (CHKP), for example, comprises 6% of the BlueStar index and is up 7% so far this year. Schoenfeld expects continued strong performance as global cyber attacks increase.
"Check Point invented the term firewall. The technology came out of the Israel Defense Forces unit 8200. But now you have companies like Imperva (IMPV), Cyberark Software (CYBR), Radware (RDWR). All of these are leaders," said Schoenfeld. "In fact Israel is building a cyber hub in the desert and it's booming already and we believe Israel will remain a leader in cyber security."