bluestar israel equity review & outlook · sarine technologies ltd 20.87% foamix...

BlueStar Israel Global Index ® Relative Performance Since 2010

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This BlueStar Indexes® Monthly Update covers Israeli equities traded worldwide. The BlueStar Israel Global Index® (BIGI® or BLS:IND on Bloomberg) is used asthe benchmark for our review as it represents the complete opportunity set of Israeli equities. BIGI® is tracked by the NYSE-listed ISRA Israel ETF and by twoTASE-listed ETNs. Israel has one of the world’s most resilient economies, its technology sector is a global innovation leader, and its companies have a globalfootprint. The BlueStar Israel Equity Update provides insight into macro forces, the geopolitical environment in which Israel’s economy operates, and theindividual company investment opportunities that have contributed to Israeli Global Equities’ impressive long-term performance.

BlueStar Israel Equity Review & OutlookSeptember/October 2015

Benchmark Period Return

BIGI® -7.42%

MSCI Israel -4.46%

TA-100 -6.22%

S&P 500 -2.64%

MSCI EAFE -8.84%

MSCI EM -3.01%

Global Equity Benchmark Comparison:September 2015

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TASE-BlueStar Israel Global Technology Index TM

Relative Performance Since 2010

Benchmark Period Return

TA-BIGITechTM -7.42%

Nasdaq-100 -2.19%

S&P Global Tech -1.37%

TA- BlueTech -6.46%

EM Internet & E-commerce -2.23%

Global Technology Stock Index Comparison:September 2015

The opinions expressed in this report are those of BlueStar Global Investors, LLC and should not be interpreted as a recommendation to buy or sell any security. Readers should consult with a financial professional before investing.

© 2015 BlueStar Global Investors, LLC

“The Path of Least Resistance”October 8, 2015

Like Newton’s apple, Israeli Global Equities, as measured by BIGI®, hit the ground with a resounding thud in September and were unable to materially rally from August’s selloff.

BIGI® declined 7.42% in September and is now barely in positive territory for the year. If there is a silver lining it is that Israeli equity markets are one of only a handful around the world that are still up in USD terms in 2015.

Nine of 10 sectors tracked by BIGI™ declined during the month, with only telecom eking out a gain. The health care and IT sectors bore the brunt of the selling, combining for 85% of the index’s September decline. The typically defensive health care sector was hit by concerns over drug pricing in the U.S. as well as by general market weakness. Index heavyweights Teva Pharmaceuticals and Perrigo both declined more than 14% in September, while several small biotech and medical device companies declined by more than 25% during the month.

(Commentary continued on following page.)

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BlueStar Israel Equity Review & OutlookSeptember/October 2015

Source: BlueStar Global Investors LLC; Currency-Adjusted returns in dollar terms

Top Israeli Equity Gainers and Losers: September 2015

Top-Performing Israeli Stocks Worst-Performing Israeli Stocks

Sarine Technologies Ltd 20.87% Foamix Pharmaceuticals Ltd -27.85%

Delek Energy Systems 11.88% Syneron Medical Ltd -24.26%

MacroCure Ltd 10.13% Crossrider Plc -23.92%

Imperva Inc 9.90% Caesar Stone Ltd -23.60%

Matomy Media Group 9.43% Opko Health Inc -22.27%

Bioline RX Ltd. 7.06% Alcobra Ltd -21.35%

Taro Pharmaceutical 6.95% Varonis Systems Inc -21.31%

Bezeq 6.62% Israel Corp -20.75%

Tower Semiconductor 6.28% SuperCom Ltd. -19.92%

Ceragon Networks 6.12% Protalix Biotherapeutics Inc -19.73%

GICS Period Contribution

Telecom Services 0.08%

Utilities -0.03%

Consumer Staples -0.03%

Consumer Discretionary -0.10%

Energy -0.13%

Industrials -0.24%

Financials -0.30%

Materials -0.31%

Info.Technology -2.13%

Health Care -4.23%

Israeli Equity Sector Contributionto BIGI® Performance: September 2015



Israeli economic data released in September was mixed, with inflation continuing to decline, and continuation of the recenttrend toward lower exports and domestic investment. The Bank of Israel cited all three of these factors as part of its decisionto keep interest rates unchanged at 0.10% and noted that “the risks to achieving the [1.0% - 3.0%] inflation target and togrowth remain high.”

September also saw a deterioration in the regional geopolitical situation, with flaring violence in Jerusalem and the West Bankand, more troubling, Russian intervention in the Syrian civil war. While the Israeli economy – and by extension its equitymarket -- is well insulated from regional geopolitics, recent developments bear watching as they could escalate rapidly.

BlueStar Bottom Line: The domestic challenges to economic growth are likely to remain in place for Q4-2015 and Israeliequities, like their counterparts around the world will need to climb an increasingly steep “wall of worry” to recover the lossesincurred in August and September.

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Market Trends &Technical Analysis: BIGI®



There was significant short-term technical damage done to BIGI® in August which contributed to follow-on selling in September. Wehave for some time highlighted the “strong resistance area” indicated by the red circle in the chart above but we still believe BIGI®remains in a strong technical position to continue its multi-year bull market once the index clears that level. The “strong support area”indicated by the green circles in the charts above and below have been included in our technical analysis charts since February 2015.BIGI® did in fact reach the lower end of this support zone, closing at 267 on September 30 before rebounding in early October.Although we have a high level of confidence that the worst is almost over for the index, if the 267 level is breached it could decline byanother 5% from there. Our moving averages analysis on the following page, however, paints a somewhat bleaker short-term picturefor BIGI®.

StrongSupport Area

StrongResistance Area

StrongSupport Area


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Market Trends &Technical Analysis: BIGI®

The trend remains bearish in the long-term chart. Last month wewrote that “we will continue to view the 267-275 area as strongsupport until the 50-day average moves decisively through the 200-day average and the 200-day average begins to slope downward.”If BIGI® does not break above the 50-day average soon, the 50-daywill move below the 200-day average and constitute a bearishsignal for the index.

A bottom in BIGI® has yet to be confirmedby the short-term moving averages. Theindex needs to decisively break above the30-day average in order to confirm that abottom had been reached in September.

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Market Trends &Technical Analysis: TA-BIGITechTM



Israeli Global Technology Equities, as defined by the TASE-BlueStar Israel Global Technology IndexTM (TA-BIGITech™), are displayinga similar technical pattern as BIGI®. While there is little to suggest that a major breakout to the upside is possible in the short-term, the index is now in the upper section of a “strong support area” that we expect it to hold. If the lower section of that supportzone is broken, significant further downside would be likely.

StrongSupport Area


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Market Trends & Technical Analysis: Israeli Shekel vs U.S. Dollar

We believe the BoI is comfortable with the USD/Shekel rate at or slightly below the $0.25 level given its stated desire toencourage exports in order to support growth. Our technical analysis suggests a near-term range of $0.24 - $0.26 (NIS 4:USD 1.) Breaks above or below those levels would support a further move in the continuation of the break.

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Israel: at the center of the global technology ecosystem



In this monthly feature we highlight the attractiveness of the Israeli technology sector by noting significant recent capitalmarkets and M&A activity:

• Israeli digital media services company RR Media is in initial talks to be acquired by Luxembourg-based global satellite provider SES. The reported deal price is $250 million.

• Valtech Cardio will be acquired by Heartware International in an all stock deal. Privately held Valtech specializes in the development of innovative, non-invasive surgical and transcatheter valve repair and replacement devices for the treatment of mitral valve regurgitation and tricuspid valve regurgitation.

• Independent power producer IC Power filed a draft prospectus for an IPO on the New York Stock Exchange (NYSE). IC Power’s Mishor Rotem OPC plant in the Negev has made a net profit of $95 million since it began operating in 2013, according to the prospectus.

• Novocure, which develops and markets a medical device for treatment of brain tumors using electrical fields is planning a Nasdaq IPO. The company is hoping to raise $300 million at an estimated $1 billion post-money valuation. Novocure’sproduct is used to treat Glioblastoma brain cancer. It has been approved by the U.S. FDA.

• An Fite Bio Pharma, which is developing a pipeline of proprietary small molecule drugs that address cancer and inflammatory diseases, has raised $9 million from various institutional investors in the U.S. The U.S. FDA last month granted the company’s CF102 research drug fast track status as a second-line therapy for HPC liver cancer, the most common form of the disease.

• Israeli start-up BillGuard has been acquired by peer-to-peer lending company Prosper Marketplace for an estimated $40 -$50 million. BillGuard helps users track, manage and protect their finances and credit. The San Francisco-based Prosper said it will integrate BillGuard’s analytics into the toolkit it offers its borrowers and investors.

• General Electric said it was starting an accelerator in Israel to focus on cloud computing and big data, with an emphasis on “the industrial internet.” GE has already invested in several Israeli companies in the biomedical, energy and cyber security sectors.

• Mediwound has been awarded a $112 million contract by the U.S. Biomedical Advanced Research & Development Authority (BARDA). The five year deal is for MediWound’s NexoBrid which removes dead tissues from medium-to-severe burns.

bluestar israel equity review & outlook · sarine technologies ltd 20.87% foamix...

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