Inside Wall Street
A BEST BET FOR INVESTING IN ISRAEL
Except for troubled financial institutions, it's hard to find stocks selling below book value anymore. That's why some pros are looking at PEC Israel Economic, a U. S.-based holding company that invests in an array of Israeli industries, including high technology, banking, construction, and shipping. PEC Israel, which trades on the American Stock Exchange, has run up about 45% so far this year. Yet at its recent price of $19.50 a share, the stock sells at a 16% discount to its stated book value of $23.28.
But the real story is in the footnotes of PEC Israel's recent 10K filing, which show that the book value vastly understates the company's assets. Investments carried on the Dec. 31 balance sheet for $94 million had a market value of $200 million on Mar. 15. And since then, several holdings--including Elron Electronic Industries and Scitex--have made further gains.
Just counting its shares of public companies traded in the U. S. and Israel, PEC Israel's real stock value would appear to be in the high 30s. And that's without its hard-to-value shares in privately held companies such as Israel Discount Bank of New York.But the story goes beyond assets on the cheap. PEC Israel earned $2.45 a share last year, and since 1986, profits have increased at a 42% compounded annual rate. And if Secretary of State James A. Baker III's shuttle diplomacy leads to peace between Israel and her neighbors, "the stock will go through the roof," says Philip Hershberg of Advisory Investment Service in Wellesley, Mass. Since there's no closed-end "country fund" for investing in Israel, PEC is the closest thing to a diversified investment in the Israeli economy.JEFFREY M. LADERMAN