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Winners and losers of 2001

Our summary of companies that made the grade in the last 12 months, and of those who weren't up to snuff

Made the grade
First winner: Blue Square Investments and Properties (TASE:BLSQ), up 58% this year
The year 2001 was the year of the old economy on the stock market, particularly when juxtaposed with the crashing hi-tech shares and the demise of the companies that invested in hi-tech and communications. The performance of some companies was impressive regardless of the weakness in the technology sector.

The first old economy company to fit that bill is Blue Square Israel (NYSE:BSI) and its subsidiary Blue Square Investments and Properties (TASE:BLSQ).

The leap was no flash in the pan as far as Blue Square Investments is concerned. Since the company listed on the TASE ten years ago it has continually displayed high yields. In the last five years the company's real yield was 150%, high above the Maof-25, whose real yield in that period was a mere 45%.

The story of Blue Square is the story of the rapid growth of marketing chains in Israel in the last few years. It is also the story of some highly talented executives.

If one reads the interviews Benny Gaon gives the press, one might get the notion it was he who invented Blue Square and was responsible for its excellent achievements. But the company's great breakthrough did not happen during his management, but at the time when three talented CEOs, namely Yossi Rosen, Yoram Dar and Yacov Gelbard were running the company. Though they may not be the best public relations people, they managed to turn the chain into one of the most successful companies in Israel in the last decade.

Second winner: Osem Investments ¿ up 50% in 2001
Dan Proper is a bit of a dull guy, an image that rubbed off on the company's share for many long years. Many an analyst deemed Osem Investments (TASE:OSEM) an expensive stock and criticized Proper's always long-term strategy. Five years ago Proper told us he wasn't a penny pincher but rather a long-distance thinker. In 2001, when the economy plunged into deep recession and the shares of Osem's competition, Elite Industries (TASE:ELEI1, ELEI5) dove 23%, Osem's profitability made it all too conspicuous.

Third winner: Supersol ¿ a 20% climb
For Super-Sol (NYSE:SAE), just like for Blue Square, this has been neither the first, nor the second year in which its yield surpassed that of the market. In the last five years the share's real yield was 100%, more than twice that of the Maof-25.

To explain the yield there is no need to go any further than the company's financial reports. Super-Sol, which we once called "the Recanatis' bank", is a very big, multi-branch bank, a giant force in its market, backed up by thousands of cash registers and a fast flooding cash flow. Above all else, Super-Sol and Blue Square together, just like Bank Hapoalim and Bank Leumi, are an ever-growing hard to beat duopoly.

The only difference between Super-Sol and actual banks is that the company has no bad debts, and the chances of the Supervisor of Banks getting up one day and declaring some of the company's profits fictitious and should therefore be written off are slim to none.

Not up to snuff
First loser: Koor Industries ¿ a 44% plunge in 2001
Jonathan Kolber points at companies such as Cisco Systems (Nasdaq:CSCO), Nortel (NYSE:NT) and Alcatel (NYSE:ALA), all of whom crashed in 2001, and says "I'm with them". He is referring to Koor's main investment, ECI Telecom (Nasdaq:ECIL), which crashed during the communication sector crisis.

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Kolber is wrong. Koor is not from the communication sector, it is an investment company, and he is the one responsible for the decision to take out a $1 billion loan with which to buy ECI shares. Too much self-confidence and the people with whom he surrounded himself are also responsible for the lousy decision.

Kolber dreamed of taking Koor, a conglomerate profiting mostly from a cement monopoly and sales to the Bezeq communication monopoly, and turning it into a holding company based mainly on export. A courageous, impressive strategy, but one badly executed and terribly timed.

Kolber did make his first significant move in Koor a month ago, when he gave the leadership of ECI to Shlomo Dovrat, the son of Aharon Dovrat. If Dovrat manages to captain a breakthrough in ECI, Koor may just make the grade in 2002.

Second failure: Clal Industries ¿ down 30%
Rimon Ben-Shaoul is an arch wizard.

The share of Clal Industries has been diving for some 18 months now, the company writing off ludicrous amounts of cash every quarter and expecting to lose more than NIS 500 million by the end of 2001 ¿ a few good years' profits.

And where is the man in charge of these losses? After all, you can't blame CEO Meir Shannie for the chaos. In his 18 months in office all he's been doing is trying to straighten it out.

The thing about Ben-Shaoul is he knew exactly when to move on to the next job and vacate the stage for the next CEO. While all this has been going on, he has been managing partner in the investment firm Shrem Fudim Kelner and taking occasional curious glances at what is going on in Clal Industries.

Last loser: Israel Discount Bank ¿ a 28% dive
Who can be blamed for the unreal losses of the Israel Discount Bank? Who is responsible for the recent ongoing decline of the only bank that could compete against the Bank Hapoalim-Bank Leumi duopoly?

The blame goes to its managers in the early 1990s, those who gave credit to dubious real estate entrepreneurs. It also goes to the current management that failed in its attempt to break the bank's workers union. The union is equally guilty for ignoring the fact Discount is no Ports and Railways Authority, nor is it the Israel Electric Company. Too militant a union could wipe out the company, and employees would be left hanging to dry.

The year 2002 could be the turn-around for the bank, or lead to its final collapse. It will reveal whether chairman Arie Mientkavich did in fact inspire a change in the bank's performance, or whether the bank has no choice but to liquidate, or merge.