Investment clubs find all kinds of tricks to choose what to put their money into, from stocks their kids pick to socially conscious companies, and even brands that represent the products they use every day in their kitchens.
But members of a group of investors in Cincinnati have found that their unique focus — investing only in Israeli-owned companies — has not only made them feel good about supporting Israel, but has also actually helped them meet or beat the average return of some of the leading American stock markets.
“I was taking this online class from the Israeli Information Ministry for people interested in defending and knowing more about Israel,” explained group founder Kim Kwiatek, an emergency room physician who makes the 50-minute drive in Ohio from Dayton to Cincinnati once a month for the group’s meetings. “One of the exercises was to come up with a project that was supportive of Israel, so I did an Israel affairs newsletter, and the other idea I had was an investment club, to learn more about Israel and its commerce.”
In 2003, Kwiatek sent out an e-mail to fellow congregants of Cincinnati’s B’nai Tzedek synagogue, and, according to group treasurer Martin Grad, 87, the Blue and White Investment Club was born. Each of the 12 charter members put down an initial investment of $1,000, and the club agreed to invest only in companies that are Israeli owned (and in their American subsidiaries).
The decision by the members of the all-Jewish investment group — made partly out of a desire to support Israel and to further their education in regard to what is going on in the country — has proved to be a wise one. While the Standard & Poor’s index has averaged a 9%-11% return over the long term, and 8%-12% is reasonable for a mixed-stock portfolio, David Trendler, a financial adviser for Cincinnati-based Gradison McDonald Investments, said the Blue and White group’s 12%-14% average is pretty impressive for a narrowly focused fund.
The group’s secret? No, not divine intervention, joked Grad, who is a retired chemical engineer. It is simply “pure luck.” The group members focus only on Israeli companies that are traded on the Nasdaq, the New York Stock Exchange and the American Stock Exchange so that they don’t have to hassle with converting shekels to dollars, or worry about overseas stock exchanges. “We thought when we started out that there would only be a couple of dozen companies to choose from,” Grad said. “But we now have a list of over 100.”
One of their first investments was in Teva Pharmaceutical Industries, Ltd.,, a leading generic pharmaceutical manufacturer that Grad called the “crown jewel of Israeli companies.” In 2005, Teva had sales of $5.3 billion, 90% of which were in North America and Europe for drugs that treat multiple sclerosis and Parkinson’s disease.
Out of the 11 stocks that the Blue and White group currently holds, nearly half are in the technology sector, where Israel has become a leader. The group also holds stock in Delek and Alon, two oil companies that have marketed their products through gas stations that they own in the American Southwest. Another company is Ormat Technologies, which specializes in such renewable energy sources as geothermal and recovered energy generation equipment. The rest of the stocks range from business management software companies, such as Amdocs, to skin treatment device maker Syneron Medical, and Ituran Location and Control, which manufactures high-tech tracking devices to find missing people and cars.
A recent meeting of the mostly retirement-aged group in a classroom at B’Nai Tzedek began with small talk about health issues, an offering of some gluten-free cookies and a spirited query of “So, did we have a good month?” from member Ezra Spicehandler, professor emeritus at Hebrew Union College. The eight members who made it to the meeting on the cold Tuesday night of President Bush’s State of the Union address discussed the status of their holdings, wondered if they should be diversifying and marveled over the colorful charts that Grad presented on a few of the stocks.
“That’s a great chart, but I don’t know what any of those lines mean,” quipped Jack Kwiatek, father of founder Kim Kwiatek. “But I like it when the ones we have are on top.” After a few questions about whether the falling price of crude oil might affect their energy holdings, the group members began to talk of possibly selling some of their shares in Teva, in which they are most heavily invested.
Though the group’s account was up to around $35,000 by the time of the meeting — giving the 15 members an annualized return of a whopping 27.8% for 2006, including their contributions — Grad said that Blue and White only had $100 in the bank, which meant it was unable to invest in any new companies without selling some stock. There was talk of getting into some real estate stock, but when the discussion moved back to Teva, retired dentist Bob Frankel asked Grad, “Didn’t you have some mishpukhe who started Teva?”
Grad nodded and said that his first cousin was one of the company’s founders. This lead Frankel to joke: “And they didn’t give you a piece of the company? Some family!”
In the end, Grad collected the $25 monthly dues from the members in attendance and said he’d look into the Israeli real estate companies he knew of and report back next month. “Israel itself doesn’t benefit from what we do, but the companies do because we make a bit of a market for their stock,” Grad said. “We’re small potatoes, so we don’t make a dent in their holdings, but we have an interest in Israel and we want to support everything we can. Besides that, it’s worked well and it makes us feel good.”
Gil Kaufman is a freelance journalist based in Cincinnati, a senior news writer for MTV.com, and a contributor to VH1.com and the Cincinnati Enquirer. Full disclosure: Bob Frankel was his dentist as a child, and though he hadn’t seen or spoken to him in more than 25 years, the memories came flooding back when he recognized the good doctor’s still remarkable set of teeth.