Investment decisions, by their nature, involve evaluating a myriad of factors that could influence expected returns. One of the major concerns that investors must grapple with is geopolitical risk.
Geopolitical risks arise from the uncertainties and challenges stemming from interactions among different countries and regions worldwide.
They can affect the stability, security, and economic prospects of the countries involved, as well as the global markets and investors.
Some examples of geopolitical risks include conflicts and wars, currency and monetary policies, embargoes and sanctions, legal and regulatory risks, political instability and social movements, and trade disputes and tariffs.
The Ukraine-Russia Conflict
Last year, we wrote about Canadian-listed Mining Companies Affected by Russia Invading Ukraine.
The article covered companies including Kinross Gold (TSX: K), Silver Bear Resources (TSX: SBR), Black Iron (TSX: BKI), Orsu Metals (TSXV: OSU.H), and Azarga Metals (TSXV: AZR).
Except for Kinross, which is up 22% over the past year, the other four companies are down an average of almost 41%, compared with the S&P/TSX Composite Index, which is up 3.6%, and the S&P/TSX Venture Composite Index, which is down over 12% over the past year.
Recent Events in Israel
The events in Israel this weekend have had a significant impact on the business and stock markets in the country. The surprise attack by Hamas militants from Gaza targeted multiple locations across southern Israel, including a music festival, a police station, a military base, and several residential areas, and resulted in injuries and deaths of thousands of Israelis.
The Israeli government declared a state of war and its impacts have shaken the confidence of investors and consumers in Israel.
On October 9, the Tel Aviv Stock Exchange (TASE) experienced its most significant single-day decline in history, plummeting by 12.7% and erasing over $50 billion in market value.
Many major companies saw their share prices plummet, especially those in the tourism, aviation, retail, and entertainment sectors. The Israeli shekel also weakened against the US dollar and other major currencies, reflecting the increased uncertainty and risk in the Israeli economy.
US-listed Companies Headquartered in Israel
Here is a list of the major US-listed companies that are headquartered in Israel and could be negatively affected by the recent events:
NICE Ltd. (NASDAQ: NICE)
- nice.com
- Headquartered in Ra’anana, Israel, NICE provides enterprise software solutions, offering a suite of solutions that empower organizations to enhance customer experience, improve regulatory compliance, and ensure public safety.
- With a broad range of clients, from financial services to telecommunications and public sectors, NICE specializes in advanced analytics, artificial intelligence, and cloud capabilities. With both cloud and on-premises deployments, the company focuses on solutions for customer engagement, financial crime, and compliance.
- NICE leverages Israel’s technological expertise as a center for its research and development initiatives.
- Revenue in the last quarter was $581.1 million up 1.6% from $571.9 million in the previous quarter, and up 9.5% from $530.6 million in the same quarter last year.
- NICE closed the week at $169.91 with a market cap of $41.8 billion. Its stock price is down from $192.30 year-to-date and down from $193.55 year-over-year.
Check Point Software Technologies Ltd. (NASDAQ: CHKP)
- checkpoint.com
- Headquartered in Tel Aviv, Israel, Check Point is a globally recognized cybersecurity firm that provides comprehensive software solutions to safeguard against threats on cloud infrastructures, mobile devices, and networks.
- Established in 1993, Check Point offers a broad spectrum of security solutions, catering to both enterprises and consumers, enhancing protection against malware, ransomware, and other advanced threats.
- Check Point revenue is supported by its recurring subscription model and diversified product portfolio.
- For Check Point, Israel serves as the central nerve for its R&D activities, hosting multiple facilities. The relationship between Check Point and Israel’s advanced tech ecosystem has been key in driving cybersecurity innovations for the firm.
- Revenue in the last quarter was $588.7 million up 4.0% from $566.2 million in the previous quarter, and up 3.1% from $571.1 million in the same quarter last year.
- Check Point closed the week at $137.02 with a market cap of $16.0 billion. Its stock price is up from $126.16 year-to-date and up from $110.69 year-over-year.
Teva Pharmaceutical Industries Limited (NYSE: TEVA)
- tevapharm.com
- Headquartered in Tel Aviv, Israel, Teva is a global leader in the development, production, and marketing of generic and specialty pharmaceuticals, as well as active pharmaceutical ingredients.
- Historically, the company’s roots trace back to Israel, where it began its operations in 1901 but now has operations in 60 countries and is one of the largest generic drug manufacturers worldwide.
- Additionally, the company also has a portfolio of specialty medicines, particularly in the central nervous system and respiratory therapeutic areas.
- Revenue in the last quarter was $3.88 billion up 5.9% from $3.66 billion in the previous quarter, and up 2.4% from $3.79 billion in the same quarter last year.
- Teva closed the week at $9.42 with a market cap of $10.6 billion. Its stock price is up from $9.12 year-to-date and up from $8.46 year-over-year.
SolarEdge (NASDAQ: SEDG)
- solaredge.com
- Headquartered in Herzliya, Israel, SolarEdge operates in the global solar industry, offering energy solutions focused on smart solar inverters and caters to residential, commercial, and small utility-scale customers.
- The company’s products integrate advanced digital technology to maximize power generation, reduce costs, and enhance the safety of photovoltaic systems.
- In addition to solar inverters, SolarEdge’s diversified portfolio includes power optimizers, storage solutions, and a cloud-based monitoring platform.
- SolarEdge taps into Israel’s tech ecosystem for its core R&D activities and serves as a center for innovation.
- Revenue in the last quarter was $991.3 million up 5.0% from $943.9 million in the previous quarter, and up 36.2% from $727.8 million in the same quarter last year.
- SolarEdge closed the week at $123.97 with a market cap of $7.0 billion. Its stock price is down from $283.27 year-to-date and down from $209.62 year-over-year.
CyberArk Software Ltd. (NASDAQ: CYBR)
- cyberark.com
- Headquartered in Petah Tikva, Israel, CyberArk specializes in privileged access security, a critical layer in the protection against cyber threats.
- The company provides solutions designed to detect, safeguard, and respond to attacks that target privileged accounts, which can offer cyber adversaries elevated access within an organization’s IT infrastructure.
- CyberArk’s suite of products ensures businesses maintain robust defenses, particularly in managing sensitive access points.
- CyberArk’s presence in Israel aligns with the nation’s stature as a hub for cybersecurity expertise. It leverages Israel’s renowned cybersecurity ecosystem and anchors the company’s R&D endeavors, thereby contributing significantly to its global product innovation.
- Revenue in the last quarter was $175.8 million up 8.7% from $161.7 million in the previous quarter, and up 23.5% from $142.3 million in the same quarter last year.
- CyberArk closed the week at $167.19 with a market cap of $6.9 billion. Its stock price is up from $129.65 year-to-date and up from $149.33 year-over-year.
Israel-based and Canadian-listed companies
A few small-cap companies either have their headquarters or significant operations in Israel and are listed in Canada. These include:
Baylin Technologies (TSX: BYL)
- baylintech.com
- Headquartered in Toronto, Canada, Baylin has over 40 years of experience in designing, developing, and manufacturing passive and active radio frequency products, and satellite communications products.
- Baylin is headquartered in Toronto, Canada, and has manufacturing facilities in China, Vietnam, and Israel.
- Baylin has a significant presence in Israel, where it operates a research and development center and a production facility through its wholly-owned subsidiary, Galtronics.
- Baylin closed the week at C$0.29 with a market cap of C$25.7 million.
Else Nutrition Holdings Inc. (TSX: BABY)
- elsenutrition.com
- Headquartered in Tel Aviv, Israel, Else Nutrition is a food and nutrition company that offers plant-based products for infants, toddlers, children, and adults.
- The company was founded in 2011 and operates in Israel through a subsidiary, which is responsible for the research and development, manufacturing, and marketing of its products in the country.
- Else Nutrition closed the week at C$0.30 with a market cap of C$34.3 million.
IM Cannabis Corp. (CSE: IMCC) and Isracann Biosciences Inc. (CSE: IPOT)
- Both companies focus on the medical cannabis market.
- IM Cannabis closed the week at C$0.81 with a market cap of C$10.8 million.
- Isracann Bioscience closed the week at C$0.02 with a market cap of C$2.7 million.
Final Thoughts
Geopolitical risks can have significant impacts on investment decisions and outcomes. However, proper diversification, both by geography and sector, can mitigate some of these risks, ensuring a portfolio that can withstand geopolitical uncertainties.
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