This ETF’s Best Move Was Avoiding Israel’s Worst-Performing Stock

By Carolina Wilson and Tom Lagerman

The appeal of some exchange-traded funds lies not in what they hold, but in what they don’t.

Case in point: the BlueStar TA-BIGITech Israel Technology ETF, which is up 25 percent this year, leaving other U.S.-listed funds that track the country in its dust. The tech fund has been boosted by its positions in Mobileye NV, which soared 32 percent before Intel Corp. announced it was acquiring it in March, and Check Point Software Technologies Ltd., which has climbed 21.4 percent this year.

But it’s also benefited from staying very far away from Teva Pharmaceutical Industries Ltd., once Israel’s largest company, which has seen its market capitalization shrink by more than two-thirds since January.

Shares in the Petach Tikva, Israel-based firm, the world’s biggest maker of copycat drugs, are down 67 percent this year after the company slashed its dividend, signaled to investors that it may sell more stock and lowered the goal for paying off some of its $34.7 billion debt pile.

That makes it the worst performer in Israel’s Tel Aviv Stock Exchange 35 benchmark, as well as in the two largest ETFs tracking the nation’s shares, the iShares MSCI Israel Capped ETF, ticker EIS, and the VanEck Vectors Israel ETF, symbol ISRA. The iShares fund has climbed just 1.9 percent this year, while the VanEck ETF has gained 6.9 percent.

For the BlueStar ETF, ticker ITEQ, the Mobileye acquisition is a gift that keeps on giving, according to Steven Schoenfeld, founder of BlueStar Global Investors LLC, which created its benchmark.

“Israeli institutional investors in particular are experiencing ‘FOMO’ on the next Mobileye,” he said. “So the idea of buying a basket of tech stocks in the region is appealing and growing in popularity.”

 

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