European Stocks with Israel Exposure

We have collated data on the biggest stocks in Europe that operate in Israel Editors 12 October, 2023 | 12:27PM
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Tel Aviv

The Israeli stock market has been falling over the past week as the world's eye turned to the deadly conflict between Israel and Hamas. The TA-35 index of the 35 largest companies has stabilised somewhat, but what about companies outside the Tel Aviv Stock Exchange?

There are several Israeli companies and multinational firms mainly operating in Israel, which trade on exchanges across Europe.

In our dataset, we have identified the stocks, trading on exchanges outside of Israel, whuch are either classified as Israeli or have Israel listed as their business country. Companies included are based in Israel, but the larger ones, being more global in nature, naturally have limited revenue exposure to the relatively small Israeli market.

Two of the stocks in the list are under Morningstar's coverage. That's Check Point Software Technologies (CPW) and NICE (NSY), two software companies with market caps of €15 and €10 billion – the largest in this list.

Check Point Software Technologies is a pure-play cybersecurity vendor based in Tel Aviv. The company offers solutions for network, end-point, cloud, and mobile security in addition to security management. It is a software specialist which sells its solutions to enterprises, businesses, and consumers. Around 50% of revenue is generated in Europe, the Middle East, and Africa, 40% from the Americas, and 10% from the Asia-Pacific region. The firm, founded in 1993 and has about 5,000 employees and trades on the Boerse Muenchen.

Nice is another enterprise software company that serves the customer engagement and financial crime and compliance markets. The company provides data analytics-based solutions through both a cloud platform and on-premises infrastructure. It offers a customer engagement platform (Nice’s CXone) and utilises AI analytics to optimise services. Within financial crime and compliance, Nice offers risk and investigation management, fraud prevention, anti-money laundering, and compliance solutions. Morningstar has assigned the Ra'anana-based firm trading on Boerse Berlin, a narrow economic moat rating.

Beyond the two under our coverage, in the biggest five by market cap, we find generic drug manufacturer Teva (TEV) and work software company in (6B6). Moreover, we see aerospace and defence technology company Elbit Systems (EB2), which is up almost 7% over the past five days.

In the total list there is one stock listed on the London Stock Exchange, online trading platform for CFDs, Plus500 (PLUS), part of the FTSE 250. It has operated in Tel Aviv since 2015 through a subsidiary.

As Morningstar EMEA editor Lukas Strobl wrote earlier this week, before the situation escalated last week, Israel was in a vulnerable position politically. Israeli prime minister Benjamin Netanyahu leads a coalition of centre- and far-right parties that has been facing stiff resistance to controversial judicial reform. The nation's currency, on a downward trajectory all year, reached a seven-year low following Saturday's attacks. To curb the Shekel's volatility and ensure liquidity in financial markets, the Bank of Israel announced $30 billion in foreign currency sales on Monday. 

Morningstar’s European equity strategist Michael Field explains that structurally, the ramping up of the conflict “only enhances the long-term prospects for defence companies”.

"Currently the US is one of the few NATO countries meeting the 2% of GDP targeted spend on defence, with most countries lagging behind. With the current conflict coinciding with the Ukraine war, and the recent escalation of the situation in Azerbaijan, this is a timely reminder to those underspending countries of the danger of underspending," he says.

And defence stocks have gained significantly over the past week (as seen for above-mentioned Elbit Systems) as the potential of a further destabilised Middle East raised the outlook for military spending in the region. BAE Systems (BA.) is up 8.78%, regional peers Rheinmetall (RHM) +12.90%, Leonardo (LDO) +9.04%, Thales (HO) +10.72%, Safran (SAF) +6.91%, and Dassault Aviation (AM) +6.75%. 

It was not just defence stocks benefiting from the war though; oil prices rose as much as 5% at one point, however, slower oil demand could be on the cards. Read more about Morningstar’s view on what the conflict means for oil markets in analyst Stephen Ellis’ commentary.

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About Author Editors  analyse and report on shares, funds, market developments and good investing practice for individual investors and their advisers in the UK.

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