Monday, December 2, 2013

Globes, Tel Aviv, Israel, Shlomi Cohen column $CAMT UP 20%

Globes, Tel Aviv, Israel, Shlomi Cohen column
Dec 2 at 15:34
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By Shlomi Cohen, Globes, Tel Aviv, Israel

      Dec. 02--Last week, there was an orgy of buying on huge volumes in two
small-cap Israeli stocks that I hold in my portfolio here: Camtek Ltd. (Nasdaq:
CAMT; TASE:CAMT) and Eltek Ltd. (Nasdaq: ELTK). I'm starting to think that
there's a new phenomenon here, because two weeks previously it happened with
another small-cap Israeli stock, OTI -- On Track Innovations Ltd. (Nasdaq: OTIV;
DAX: OT5).
      At least in the case of the first two stocks, the volume of trading in
relation to the quantity of shares on the market indicates that US day traders,
both individuals and funds, latched onto them. They made hundreds of intraday
purchases and sales, giving rise to trading volumes several times the float in
each stock.

      Because of the dizzying success of several 3D printing technology
companies, clever speculators realized that, as in the bubble period,
when any stock ending in .com soared skywards, today, any stock even remotely
connected to 3D printers will do likewise.
      An article on Seeking Alpha last Monday, the headline of which cunningly
connected Migdal Ha'emek-based Camtek to 3D printers, lit the stock's fuse, and
the herd piled in. It happened in spite of the fact that Camtek has no
connection whatsoever to the kind of 3D printers that Wall Street loves, such as
are produced by 3D Systems (DDD) or Stratasys (SSYS).
      The Israeli printing connection
      Perhaps because of the fact that Israel has a strong connection to the
printing world, speculators went for Camtek. Scitex was in printing, and Benny
Landa, through Indigo, brought the digital printing revolution from Israel to
the world. 3D Systems and Stratasys, which have market caps in the billions of
dollars, also have Israeli roots.
      Last Wednesday, in an interview with CNBC, after releasing good
financials, HP (HPQ) CEO Meg Whitman said that Indigo, which HP bought from
Landa, had a strong quarter. 3D Systems has been run for about a decade by Avi
Reichental, who left Israel at age 20 after studying in a yeshiva and military
service. Since early 2103, Stratasys has also been managed by an Israeli, David
Reis, who had previously merged Objet into the company. CFO at Stratasys is Erez
Simha, who came from Orbotech Ltd. (Nasdaq: ORBK).
      So what does Camtek have to do with 3D printers, and what's the Eltek
connection? On the basis of Printar, acquired for a paltry sum during the crisis
of 2009, Camtek has developed a machine for producing printed circuits that,
with the aid of unique digital technology, replaces several of the complex
chemical processes currently involved in painting the green insulating material
on the circuits.
      Before it was acquired, when Printar was an independent company, it chose
circuit maker Eltek as its test site, and the connection continues to this day,
to the satisfaction of both sides, even though Eltek is a direct competitor of
circuits maker PCB, a sister company of Camtek.
      According to Camtek, and according to Eltek as well, after many years of
development, the machine now performs well, and it will be launched onto the
market next year. Camtek is looking at a potential market of $600-700 million
annually, and, as with Indigo's business model, the most profitable side is the
ink. This is a big breakthrough for Camtek, but there is no connection to, and
no comparison with, the potential markets of the above-mentioned 3D printer
      Given the herd phenomenon, I shouldn't be surprised if we receive reports
shortly that insiders at Camtek, such as Avigdor Willenz, who holds 6 percent,
sold some of their holdings at the peak prices of over $6 that the share hit
during the days of the euphoria.
      For Camtek's parent company Priortech Ltd. (TASE:PRTC), which holds 60
percent, this has been a rare opportunity of let go of some shares at prices it
never dreamed of. For years, US investment institutions interested in buying
into Camtek have complained that there aren't enough shares on the market, and
that Priortech ought to sell, and reduce its holding substantially.
      For Eltek, it was a perfect storm, and the Camtek connection, plus
excellent financials, lifted the stock to a peak -- $3.95 not seen for many a
      Exactly a month ago, Yossi Maiman completed the sale of control of the
company at a valuation of $9.5 million, and at Friday's close the company had
a market cap of over $27 million, taking into account the number of shares
that changed hands.
      From a situation in which investors gave Eltek a negative control premium,
in Maiman's day, because the company was not his chief focus of interest, they
now give a high, positive control premium to new owner Nistec, through chairman
Yitzhak Nissan and veteran CEO Arieh Reichart. Strong demand, mainly from the
military, plus good synergy with Nistec, should lead to further strong results
in the future as well.

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