Israel needs your money but save the tzedaka, says the board chairman of a new Israeli mutual fund that will invest exclusively in Israeli companies.
"Israel does not need charity, only investments," said Shlomo Eplboim of the Blue and White Fund (the colors of the Israeli flag), set to debut Dec. 31.
Even with stock prices plummeting (the Nasdaq Composite Index, for instance, has fallen 73 percent from its high, the steepest drop for any major U.S. market index since the 1930s) Eplboim insists the time is ripe to invest, "while blood is in the streets."
"You’re not buying companies, you’re buying businesses," he said.
Asked about introducing such a fund when investors are fearful that stock prices will drop even further in the event of war with Iraq, Eplboim said the Tel Aviv Stock Exchange has "already built a war into stock prices."
The Blue and White Fund may invest 100 percent of its assets in Israeli companies that trade in the United States or up to 25 percent in Israeli companies, such as Israeli banks, that trade solely on the Tel Aviv Stock Exchange. It also has the flexibility of keeping all its assets in cash, Eplboim said.
The fund will be offered at $10 a share when it becomes available at a variety of financial institutions.
"This will be the first actively managed portfolio managed from Tel Aviv," Eplboim said.
Michael Cherniak, director of research for The Blue and White Fund, noted that prices on the Tel Aviv exchange have dropped so low that "some companies are selling at 5 to 8 times earnings." The PE (price-earnings) ratio of the TA 25 (the leading index equivalent to the Dow Jones averages) is only 13.5. In the United States it is 19.8, Cherniak noted.
"In the last five months," he added, "42 Israeli companies or 6.5 percent of the 600 companies traded on the TA Exchange went private" because the stock price had dropped so low.
This is at least the third mutual fund to invest exclusively in Israeli stocks. One of the funds was discontinued and another, Amidex 35, started in June 1999, and the next year it was the best performing foreign fund in America. At its height the Amidex 35, which invests in the top 35 Israeli companies trading on the Tel Aviv or New York exchanges, was up 110 percent, from $10 a share to nearly $22. But with the tough times in the market Amidex has dipped to $6.20.
Clifford Goldstein, president of Amidex Funds, said the drop "has to do with the world economy and the collapse of the Nasdaq."
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