Taking Stock / Those Good Old Days

Last week the Maof-25 index dipped below 300 points for the first time since June 1997 - 47 percent below its nominal level in September 2000.

If we factor inflation in for these five years, we conclude that the stock exchange has decimated investors in recent years. Dozens of stocks are trading at 50 percent to 90 percent below their peak values, having slumped to their lowest levels over five years or more.

A more interesting aspect of the transformation the economy has undergone arises from comparing the market caps of the big companies today, versus three years ago. Here are a few examples.

l Teva Pharmaceuticals (TASE, Nasdaq:TEVA) is trading at a market capitalization of NIS 45 billion. Not only is Teva responsible for 30 percent of the Maof-25 index's yield in the last five years - its market value is greater than that of all the other industrial companies together. That includes companies such as Israel Chemicals (TASE: CHIM), Agis Industries (TASE: AGIS), Elco Holdings (TASE: ELCO ), Elbit Systems (Nasdaq:ESLT), Makhteshim Agan Industries (TASE: MAIN ), Osem Food Industries (TASE: OSEM), Clal Industries and Investments (TASE: CII ), Delta Galil Industries (Nasdaq:DELT), and many others. Sad to relate, but Teva's phenomenal success has yet to be emulated by any other Israeli company, as the stock market figures show.

l Tadiran Communications (TASE: TDCM) hit a market cap of $190 million this week, just 5 percent below the market cap of the Koor (NYSE:KOR) conglomerate. It has only been three years since Koor sold the controlling interest in Tadiran Communications to a group of investors headed by the company's CEO, Hezi Hermoni. Koor sold Tadiran according to a company value of $155 million. Today Koor itself is trading at a valuation of $200 million, a tenth of its valuation three years ago. What has happened to Tadiran and Koor attests to the extraordinary success of Tadiran's management buy-out, and to the failure of Koor's management.

l Delek Group (TASE: DLEKG) stock has been spiraling down fast in recent weeks. After the recent slump, the company, which distributed over a billion shekels cash dividends in five years, is trading at a market cap of $450 million. Until February 1998, Delek belonged to the Recanati family's investment group, IDB. Then along came Yitzhak Tshuva and snatched it from the family in the biggest hostile takeover the local market had even seen. At its peak, the IDB group traded at a market cap of $1.2 billion. Today its market cap has sunk to $440 million, lower than Delek's. Much has been said about the developments at the Recanati concern over the last five years, since patriarch Rafael Recanati died. But comparing IDB's performance to that of the company it lost, says it all.

l Dankner Investment (TASE: DKNR ), the flagship of the broader Dankner family, hit a market cap of $41 million this week. Three years ago today, its market value was $264 million. Its story is that of the telecommunications industry, and of leverage, two bubbles whose deflation eradicated much of the value the Dankner scions had generated over two decades of successful business, in the 1980s and 1990s. The Dankner collapse can be attributed largely to the company's focus on telecommunications. But there are plenty of companies out there with much more disperse portfolios, that destroyed even more value.

l Polar Investments (TASE: PLR ), formerly known as Poalim Investments, that jewel of the Shrem, Fudim, Kelner (TASE: SFK ) group, this week struck a market value of $22 million. Three years ago from today, it commanded a market value of $335 million. En route it did pay dividends, this is true, but they pale against this blinding implosion of value. SFK built a group of companies that did well at generating value during good times, but that proved unable to weather crisis.

l United Mizrahi Bank (TASE: MZRH), just three years ago boasted a market cap of $610 million, which was $120 million less than that of First International Bank of Israel (TASE: FIBI). Today, FIBI is trading at a market cap of $220 million, exactly half that of Bank Mizrahi. FIBI chairman Shlomo Piotrkowsky and the managers of Israel's big banks financed most of the companies mentioned above. And when the crunch came, so did the bill for their strategy.