Conspiracy Theory & Israeli Stocks
With everything going on around the world I've been a little slow responding to reader comments lately. So today I'm going to answer a few questions in rapid fire fashion so that you won't think I don't read what you send me. The truth is, I read every email that comes my way, and save the ones I want to respond to. Occasionally I get some great commentary, like this email from Richard who enjoyed my perspective on the European bailout….
"Hi Ian, I've been a long time reader of yours…The [European] Bailout is no surprise I'm sure to most, the alternative is self destruction so cooler heads prevailed. The Central Banks cannot allow themselves to be exposed (as in transparent) that would be the end of their game. This might sound a bit like conspiracy theory… We now know without a doubt that precious metals have been tightly manipulated for obvious reasons and the stock market is ruled completely by the few big players…
People have always had more unused power than they believed and the power elite have done everything they could to keep it that way. It is said you can't fool all of the people all of the time. We are now living in a time where very shortly you won't be able to fool any of the people… Witness the desperate attempts by governments today to reign in the populace trying to create bogus enemies raising the level of fear and once again dependent on them. It's not working!
Bypass the systems you once relied on, form your own financial networks, educational networks, economic networks, remember that old concept when you were a kid, THE CO-OP!! It is a powerful concept in so many ways and will terrify big business and big government. Opt out! Refuse to take part! Cut up your credit cards! Form your own Associations!"
Right on Richard! He's right, his view is a bit conspiracy theory but that's ok. I agree with his main point that we need to take it upon ourselves to provide for our futures, and to speak up so our voices are heard.
That's why I do what I do here at Wyatt Investment Research, and we've got a pretty good network going so far. What do you think of Richard's opinions? Drop me a line at: editorial@smallcapinvestor.com
**Caprio responded to my article about Israeli technology stocks. I've been slow to respond to comments – my apologies.
"I read your daily reports which provide invaluable information for retail investors. The ETF of Israel has already attracted my attention since a few years ago but I was not aware of the good economic and financial prospects for this country as you reported today. Keep waiting for further news from you."
Caprio is talking about the iShares MSCI Israel Capped Investable Market Index Fund (NYSE: EIS). This fund has a weighting cap of 24% for an individual security, and right now the largest holding is one of my favorite large cap stocks, Teva Pharmaceutical (Nasdaq: TEVA). The EIS ETF is a good option for investors looking for exposure to Israel, but who don't want to invest in individual stocks.
The EIS recently had a big pullback, and fell to around $50 from a high of $60 in early April. It's around $55 right now, and looks attractive. The main risks when investing in Israel are geopolitical – no surprise there. But the opportunities far outweigh the risks, and I think the country has done an amazing job building a diversified economy given lack of natural resources...
***I like the EIS, but I'd also recommend looking at individual small cap stocks. Mark wrote in wondering about Cellcom Israel (NYSE: CEL).
Cellcom is pushing the small cap limit with a market cap of $2.8 billion, but it's worth a look since it recently dipped from $34 per share to $28, a 17.5 percent drop. The current price brings the dividend to almost 10%, something that should perk small cap value investors' ears. However, that dividend equates to a 98% payout ratio – so investors shouldn't assume that it will continue indefinitely. That said - Cellcom has been paying a dividend since 2007 so there is some history there.
Not surprising given the company's name, Cellcom provides cellular communications in Israel. Revenues and net income exploded in 2009, rising more than 250%. After the pullback, the company trades with a trailing PE of 9 and a forward PE of just 2.5. Analysts are expecting around 18 percent earnings per share growth this year, and around an average of 12 percent over the next five years. Accordingly, the company trades with a PEG of .75, indicating it is undervalued.
I want to do more research on Cellcom to see what exactly is going on with the company before jumping on board. There have been some management changes recently, and that is always worth a look. But the recent pullback, the high yield, and the potential for a nice bounce in the stock price are all compelling enough to do the research.
Let me know if you find Cellcom interesting, and what you dig up on the company. I'll return to it tomorrow if there is enough interest out there. My address is: editorial@smallcapinvestor.com.
***The gold mining company I've been alluding to in Small Cap Investor Daily rose another 6 percent yesterday. That makes 11% this week. There is still time to buy this miner and benefit from gold's rally higher. In fact, I think this stock could double in 2010.
In the last quarter this company received an average price of $1,119 per ounce, and total cost per ounce was only $425. That's a $694 profit per ounce! That's why I love low cost gold producers, as the price of gold goes up, their margins expand. And the more gold they pull from the ground – well you get the picture.
It's not too late to pick up shares. Get my full research report here. If gold continues to climb, as I think it will, you won't be disappointed.
Until Tomorrow,
