David Clark interviews Justin Boris, Founder and CIO of Ibex Investors, about investing in Israeli companies. They discuss the success of the Lazarus Fund, challenges of microcap investing, finding value in lesser-known companies, Israel's dominance in autonomous driving technology, and the investment opportunities in Israel despite the challenges.
Microcap stocks offer potential for higher returns due to being underfollowed and underappreciated.
Investing in Israeli companies can provide high returns with lower valuations compared to US stocks.
Deep dives
Investing in Microcap Stocks
Justin Boris discusses the potential in microcap stocks, which are the smallest public companies with a market capitalization below $300 million. He highlights that these stocks are often underfollowed and underappreciated, providing an opportunity for investors to uncover hidden gems. Boris emphasizes the importance of conducting thorough research and visiting these companies in person, as there is limited research available in the microcap space. He suggests that this niche area can offer higher returns compared to more widely known stocks.
The Israeli Investment Opportunity
Boris explains why Israel presents an attractive investment opportunity. He highlights Israel's strong track record as one of the best-performing stock markets, with numerous innovative and fast-growing companies. He attributes Israel's success to factors such as mandatory military service, which cultivates valuable skills, and the necessity-driven innovation stemming from living in a dangerous neighborhood. Boris mentions Israel's thriving cybersecurity sector and its leadership in autonomous driving technology. He believes that investing in Israeli companies can provide high returns, especially considering their lower valuations compared to US stocks.
Investing in Israel and the Hedge Fund Approach
Boris discusses the advantages of actively managing investments in Israel. He notes that investing in Israel involves certain challenges, such as travel, time zone differences, and negotiating with Israelis. However, he argues that the potential for annual returns exceeding 23% justifies the extra effort. Boris compares Israel's emerging market-like returns with the stability and legislative regime of a developed country. He also outlines the value of actively managed funds, which can take advantage of valuation arbitrage and tap into niche sectors that may not be covered by traditional index funds.