With investors still worried about a slow U.S. economy, one of the hottest investing themes has been to gain exposure to fast-growing emerging markets. More specifically, we often refer to the BRIC (Brazil Russia, India, and China) nations as a place where all investors should have exposure. I also recently wrote about the growing economic success of Chile, with a strong democratic government and its valued participation in the global economy.
However, my favorite growth story is a country that is growing in a way that dates back to the ideals that led a once-booming United States economy. Entrepreneurship and innovation have helped elevate Israel to the forefront of the world in technology advancement. This has allowed Israel to create jobs internally through education and innovation unlike most other small countries that depend on foreign direct investment. In fact, Israel's Haifa region is the Israeli equivalent of Silicon Valley, boasting more start-ups per capita than any other nation in the world. The country's highly educated workforce has also spawned more engineers and scientists per capita than any other country.
Get in on the growth
On Thursday, the Tel Aviv Stock Exchange's TA-25 Index finished at an all-time high. Investors who want to gain broad exposure to Israel could choose to play the iShares MSCI Israel Capped Investable Market Index Fund (NYSE: EIS ) ETF, or the Aberdeen Israel Fund FD Inc. (AMEX: ISL ) , which is a closed-end fund invested in Israeli securities.
However, Israel also has more than 60 companies listed on the Nasdaq, which is more than any other country except our friends in Canada. So let's look at a couple of those innovators with strong global businesses.
Check Point Software Technologies (Nasdaq: CHKP )
Check Point, a true Israeli entrepreneurial growth story, is now the second-largest company in Israel, behind only Teva Pharmaceutical (Nasdaq: TEVA ) . Check Point is a full-service software security company that is credited with making the first ever commercially available firewall product. The company's security systems are now used all over the world by every company in the Fortune 100 and by 98% of the Fortune 500 companies.
The company has created a competitive advantage over global competitors such as Juniper (NYSE: JNPR ) and Cisco (Nasdaq: CSCO ) , by focusing solely on developing fully integrated software and network protection.
As the leading stand-alone software security and appliance provider, Check Point's potential for growth is astronomical. The proliferation of smartphones and cloud computing are huge investing themes we read about each day. With the rapid growth in the flow of data and information, there will be a much greater need for systems security and protection, and Check Point is positioned as well as any company to provide these services. The company currently gets 44% of its revenue from the U.S., 38% from Europe, and 18% from the Middle East and Asia-Pacific.
Intel's (Nasdaq: INTC ) recent bid for McAfee and Hewlett-Packard's (Nasdaq: HPQ ) ArcSight purchase show just how important IT security has become. It has also led some to speculate that Check Point is in the crosshairs of another multinational company. However, Gil Shwed, CEO and a founder of the company, has long maintained that the company is not for sale. He again repeated that mantra this week, stating, "We are very proud of the fact that we are an Israeli company, an independent one."
Radware (Nasdaq: RDWR )
Speaking of enterprise network solutions, Radware makes products that improve the flow of data on these systems. Essentially, Radware makes networks work smarter and faster to prevent bottlenecks and improve system security.
I particularly find this stock interesting in the current economic environment in which businesses continue to search for ways to keep costs low. In the past, businesses with slow or outdated networks would look to purchase an entirely new system or hardware. However, Radware's application delivery controllers allow businesses to upgrade existing systems at a much lower price point.
Radware boasts a clean balance sheet with no debt and about $70 million in cash and short-term investments. Similar to Check Point, Radware has been speculated about as a take-out target in the near future.
Invest in Israel
While there are certainly geopolitical risks that come with investing in Israel, the country has continued to produce new technologies and grow its economy through entrepreneurship and innovation. Many American companies have already taken notice, and I think it is time investors did, too.
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