Epsilon Investment House Ltd. sees great potential in the activity of Israeli gas exploration companies in 2013, and says that the sector is its stock pick for investment next year.
In its summary for 2012, Epsilon says, "The big story, which will begin in 2013, and will grow strongly in the following years, is gas." It estimates that natural gas flow from the Tamar field will save Israel $2.2 billion in imports in 2013, and that the savings will increase to $5.6 billion in 2018.
Epsilon says that many companies will see higher profits from the use of Israeli gas, and it estimates the contribution to Israel's GDP at 2%. It believes that major consequences of local gas flow will be a strong shekel and drop in the government's financing costs.
Epsilon says, "The gas discovered in the Tamar and Leviathan reservoirs are a defensive anchor, in view of the large cash flows expected from 2013. 2013 will be the year of energy in Israel and the US."
Epsilon's stock picks are Delek Group Ltd. (TASE: DLEKG), its subsidiary Avner Oil and Gas LP (TASE: AVNR.L), and Ratio Oil Exploration (1992) LP (TASE:RATI.L). It says preference should now be given to selectively picking stocks over investment in an index. It also mentioned income-producing real estate companies Gazit-Globe Ltd. (NYSE: GZT; TASE: GLOB) and Alony Hetz Property and Investments Ltd. (TASE: ALHE).
Epsilon gave "Underweight" recommendations for supermarket chains, food companies, and Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), and gave a "Market weight" recommendation for the two mobile carriers Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR).
In the bond sector, Epsilon recommends high exposure to corporate bonds. It says, "Despite the huge rally in corporate bonds, and assuming that the interest rate in Israel will stay low, investment in this instrument provides a fairly good risk-reward ratio, and is a worthwhile investment." Epsilon is less bullish on government bonds.
Published by Globes [online], Israel business news - www.globes-online.com - on December 18, 2012
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