We continue to believe that Check Point Software Technologies and
Comverse Technology are the soundest of the Israeli or Israeli
related companies. Both have experience and appear poised to maintain
explosive earnings growth. In looking back almost exactly a year ago
CheckPoint was at $183, or just under $46 adjusted to two stock
splits in calendar 2000. We paid $110.50 a share. Back in October
Check Point traded at its 12 month high of nearly $178. Comverse had
traded as high as $124. We paid $91.
Our conviction leads to a 25% allocation of assets in our portfolio
to each of these two companies. $250 K was employed in establishing
each position. The shares of the remaining five choices were
allocated 10% each or $100K per position.
On November 20 last year we cashed out our IHTIR Model Portfolio and
realized $678,540. This amount included a profit of $431,690 or up
174.9% since the Portfolio's inception in January 1999. One of the
issues was related to the market itself. We were bearish on the
prospects of the Nasdaq which had been brutalized since April 2000.
Eventually by the end of the calendar year 2000 the Nasdaq had
suffered an all-timeone year record loss of 39%. Another factor was
that our holding in CheckPoint had ballooned to nearly 55% of the
total value of the IHTIR Model Portfolio. We are market contrarians!
We listened to pundits' cries that the Nasdaq was still overvalued.
However, as 2000 was ending on a sour stock market note, we became
convinced that Nasdaq was oversold. No one proclaimed this but we
noticed that the Dow Jones, by contrast, at that point, was only 10%
below its yearly high. As the new president of the United States was
hastily putting together his government, economists issued warnings
that the US was heading for a recession, which could result in a none
too soft landing. We incorrectly anticipated that US Fed Chief Alan
Greenspan would wait towards the end of January to announce a cut in
interest rates. We did believe that the Bush Administration would
have the political will to prevent a recession. A recession would be
a disastrous start for the new President. He would promote further
interest rate reductions and tax cuts, we reasoned. Both of these are
traditional strong stimulants to the American stock markets. If we
waited for this scenario to develop the market will have by then
factored in the interest rates. By then it would be time to sell out.
We patiently listened to the advisors in the private banking
community who counselled "to wait until mid 2001" before even
starting to think of looking at the Nasdaq. We figured that the smart
money will come in early and leave, as the less sophisticate come
in, as usual, near the top. So on January 2 we invested $1.0 million
in our new portfolio. The distribution in this newly launched
Millennium Israel High-Tech Model Portfolio reflected our belief in
company specific issues.