The crazy trading last week in Israel, when MSCI reclassified Israel as a developed market soon after Israel joined the OECD, also impacted Nasdaq-traded Israeli shares that don't trade on the Tel Aviv Stock Exchange (TASE).
Orbotech Ltd. (Nasdaq: ORBK), for example, is a stock held in large quantities by international institutional investors, and on Wednesday the share fell 7% on huge turnover. Analysts at investment house Needham wrote the next day that it was a buying opportunity, because the drop was a technical one, as emerging market funds sold Orbotech, which is no longer based in an emerging market.
Over the next two trading days, Orbotech surged back 17%, while at Needham they point out that the company is set to earn $1.10 per share on a proforma basis this year, and they forecast that in 2011 profit will grow to $1.30 per share. I do not know a lot of shares with profit and growth like that, which are traded at a low 12-month forward price/earnings ratio of 9.
Orbotech will hold an analysts' day in California next Tuesday, and I expect that optimistic words by its managers will lead to a continued upward correction in its shares.
On the food chain of LCD screen production, US giant Corning (GLW), which makes the glass panels from which they cut the screens, is one stage ahead of Orbotech's machines that inspect them. Goldman Sachs writes that following a Seattle conference on LCD televisions last week, the analysts feel that this market will grow in the coming years at a faster pace than thought. That leads them to recommend shares in Corning, which is traded at a multiple of around 8, and I reach the same conclusion about Orbotech.
Generally, a wave of television replacements occurs every 8-10 years, but at Goldman they believe that new technologies such as HD, LED, 3D, soon Internet television, will greatly reduce the distance between replacements in the future. Panasonic experts, for example, told the conference that out of 110 million households in the US, a third bought their latest television more than six years ago, and it seems that likely that most of them will upgrade soon.
It should be remembered that Orbotech is active also in inspections of smartphone screens and screens for all types of computers, including the screens for Apple's iPad, which has become a major hit. For example, at a Barclays conference held last week, the CEO of Verizon said that he does not receive enough of Motorola's Droid smartphones, because Samsung does not manufacture enough screens, and they are waiting for Samsung to increase its production capability. In my estimation, that means more of Orbotech's inspection machines.
Published by Globes [online], Israel business news - www.globes-online.com - on June 1, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010