I don’t know what the real reason is for the substantial rise in Elron Electronic Industries’ (Nasdaq: ELRN; TASE: ELRN) trading volume, which has reached unprecedented heights. One possible explanation is the conference begun by the late John Westergaard, held yearly in the Waldorf Astoria hotel in New York. The man himself, who died over two years ago, following a tough tussle with the US Securities and Exchange Commission (SEC), which he eventually won, was one of the first economists-reporters-analysts-share traders to pay attention to Israeli shares.
The 28th Westgaard Small Cap Conference, which is taking place this week, is sponsored by investment houses Paulson Investment Company and Dutton Associates, which have begun to cover Israeli companies. Elron is the only Israeli representative at the conference, and let it be said that at the beginning of this month, Dutton issued a “Strong Buy” recommendation for Elron’s share.
I therefore assume that the appearance of Elron president and CEO Doron Birger at the conference has given the main participants, many of which are investment institutions, the message that Elron does represent the best in Israeli technology. Elron, however, is not the high-tech incubator that many remember. It is a management and holding company that exists for the benefit of its shareholders. Birger has successfully turned Elron’s image around, and in the US, the difference between incubator companies and a company for whom investors are the most important thing is the difference between a share that doesn’t represent real value, and one that does.
It may well be that another story is developing here, regardless of any connection with the conference in New York. I know that Elron is making a big effort to acquire companies in high-demand technology sectors, such as alternative energy. It could be that the interest, together with the discovery of value in the share and listening to Birger, is also due to the belief that the company is on the verge of a big acquisition.
Top Image reason for optimism
Top Image Systems (TiS) (Nasdaq: TISA) last week published its financial statements, which showed that the company’s recovery is continuing. The share, however, responded by falling. What gives this share a boost from time to time, in spite of it all? Stories like this one from yesterday. The company announced that it had signed a contract with a major outsourcer named Prodata for the processing of 500,000 documents a day, using Top Image’s eFlow program. Prodata assigns a great deal of work to subcontractors.
For companies like Top Image, Eltek (Nasdaq: ELTK), Commtouch Software Ltd. (Nasdaq: CTCH), Silicom Connectivity Solutions Ltd. (Nasdaq: SILCF), and Mind CTI (Nasdaq: MNDO; TASE: MNDO), monitoring them at the current stage of their business life spans should come only after the companies make sales. All the other parameters involve streamlining, which they’re all doing anyway. If sales are rising, and the management of these companies believes that their future is before them, then they’re all worthwhile investments. Top Image is not interesting just because of a deal of the kind just announced. Top Image is interesting mostly because of its technology and its sector. Incidentally, growth in all the companies I mentioned is organic. Yes, Mind CTI acquired a company, but it was a strategic acquisition, and its effect on the company’s cash was fairly small. Organic growth indicates a direction. Top Image is operating in a rapidly growing field, and it’s now all in the hands of CEO Ido Schechter and the company’s very experienced board of directors. There’s no reason why the Top Image shouldn’t make a breakthrough.
I’ll wind up with G. Willi-Food International (Nasdaq: WILCF; TASE: WLFD). Quietly, with no fuss, the share has risen 30% since the beginning of the month. Its results have improved significantly, and the company is starting to distribute dividends. That’s excellent news, but it’s not enough to make the share zoom like that. What could the reason be? I believe that the company’s management hasn’t given up on the idea of acquiring a US distributor. The US kosher food market is too good and attractive for the Williger brothers to give up on. Furthermore, during their first due diligence process, they became familiar with the fleshpot that goes by the name of the US ethnic food market. Their first effort failed, rightly so as far as management was concerned, because they found too many problems in the course of due diligence. The US does not lack food marketing companies, and a little birdie from New York whispered to me that another round is underway now. Knowing the owners as I do, it’s hard for me to believe that the acquisition won’t go through.
Published by Globes [online] - www.globes.co.il - on November 24, 2005