Ron Senator is a managing partner at hedge fund Sphera Funds Management. Sphera was founded in 2004, and is considered a pioneer in the local hedge fund sector, with billions of shekels under management. Its funds raise money from qualified investors (with at least NIS 10 million in liquid capital) and institutional investors.
"Globes" asked Senator whether he thought the Tel Aviv Stock Exchange looked too optimistic. "Because the recent gains in the stock market were recorded in a short period of time, the optics seemed exaggerated to us," he says. "Only over time will we be able to see whether the market really reacted with the right curve. It may rise further or even correct downwards, but in general, there is a vector here that goes beyond a 'routine' improvement in the capital market after a peak in the conflict, and that trend line is quite clear."
In general, on the market's reaction, Senator says, "If we look back to last September, there’s a sense that we’ve already seen what’s happening today, so there’s less investor panic and fear. Since the pager attack on Hezbollah's leaders in Lebanon, the Tel Aviv 35 Index has jumped sharply (almost 40%, H.S.) to date. You can actually see that it hit a low at that time and has been rising since then. So, the response is similar now (after the successful attack on Iran, H.S.). Stock markets are like that.
"We at Sphera also track and monitor capital movements of foreign investors daily. One might think there would be some sort of flow out of the local market, but we didn't see anything like that. So, all in all, that supports my interpretation of what’s happening.
"On the one hand, this is not the market of early 2024, when prices were very depressed, partly because of expectations that the economy would be severely damaged by the Iron Swords war," Senator says. "On the other hand, the p/e ratio is not only the share price, but also the company’s profitability – and at the companies here, profitability is better than we thought.
"There is an understanding here (on the part of investors) that even during a year and a half to two years of war, public companies in Israel have performed very well in many sectors. The ability of businesses here to adapt and grow profits is impressive. What's more, it was achieved under difficult macro conditions."
So, should we buy shares on the Tel Aviv Stock Exchange today?
"I'm not a prophet. It's hard to say anything about the short term. If you make changes in your investment portfolio, you should do so only when you think there is a change in the medium- to long-term paradigm, and not because you think the market will rise in the coming week, because we have no idea about that."
On the defense sector: "A tendency to go beyond conservative pricing"
Shares of defense companies have been on a notable upward trend on the Tel Aviv Stock Exchange for some time. Elbit Systems, the biggest of them,has become the third most valuable stock on the exchange (after the two largest banks), and is traded at a NIS 74 billion market cap, after rising by more than 130% over the past year. Other defense stocks, including Aryt Industries (manufacturer of electronic detonators) and NextVision (developer of stabilized cameras for drones), have jumped by hundreds of percentage points.
Senator says, "I recently spoke with a large family office in New York, where they told me that they hold Elbit shares because, as far as they’re concerned, this is the way to participate in the success of the defense industry here."
However, he hints that the hype surrounding the defense sector may be overblown. "The local market has taken an optimistic view of defense tech stocks and has a tendency to push prices beyond conservative valuations."
Extraordinary rises have also been recorded in local construction and infrastructure stocks. Senator attributes this to the question of protected spaces in Israeli construction projects. "Here is a fairly simple analysis of the issue regarding safe rooms: if, after almost every review conducted here in the wake of a war, it turns out that 60% to 70% of apartment buildings in Israel lack standard safe rooms, then we can assume that urban renewal will probably accelerate after the war.
"If there is a boom in business here after the war, public budgets and private investment will be released for renewal and development projects, and companies in the construction materials and products sectors will also benefit."
On the banking industry: "A good profitability mix"
"I think that banks in Israel are a sector whose business DNA has changed a lot in recent years. They have become results-oriented and profit-oriented entities," Senator says. "The banks today are healthier and sharper in their thinking, and in the current situation, a mix in profitability has been created that is both very good and also allows the banks to manage their capital optimally.
"The banks look good on almost every parameter – operational efficiency, return on capital, and profit. These are not growth stocks, but value stocks with healthy market characteristics." As for their results in the coming year, however, Senator refuses to make predictions. "To assume that they’ll continue earning at the levels they reported over the past year is a challenge. But on the other hand, in the past I’ve never seen the major banks in Israel issue profit forecasts two or three years ahead – especially not with such strong projected profitability. So, from an investor's perspective, there’s logic behind the expansion in the valuation multiples by which the banks are being measured."
Regarding the insurance companies, Senator says, "Our impression is that there’s positive business development in some companies, like The Phoenix Holdings and Menora Mivtachim, which have shifted their business mix. They’re placing greater emphasis on profitability rather than on capital. In addition, the IFRS 17 standard, which was recently implemented in the insurance companies’ reports, has eliminated some of the noise that existed in the past. Previously, it was hard to predict where insurance companies were headed. Now, we have models for the next one to two years."
What is the right thing to do with your investment portfolio?
"I believe a portfolio should have diversification and balance – all the usual principles of investment management apply here. We’re still not Switzerland, but the changes taking place in the local market are very interesting, especially with the emerging trend suggesting that the risk premium, which was high, may be coming down.
"In the end, we are a very small part of the global investment pie. So, anyone who wants to build a long-term investment portfolio, with checks and hedges, must make sure that it’s balanced."
Published by Globes, Israel business news – en.globes.co.il – on June 26, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
