One Israeli gas company just doubled in value – and another one will probably follow suit

One Israeli gas company just doubled in value – and another one will probably follow suit
5 April 2019

Israel has long been famous for being just about the only spot in the Middle East that does not have vast oil and gas reserves. Or as the old joke went: "When Moses led his people out of Egypt, he should have turned RIGHT, not left."

It isn't widely known yet, but this situation has actually changed entirely during the past decade.

In 2009, one of the largest gas fields ever found was discovered off the coast of Israel. This came on top of smaller gas fields identified nearby. The facilities to distribute gas to customers in Israel are just about to get finished, and the country will now go from being utterly dependent on energy imports to being completely energy independent.

Here are some statistics you probably haven't come across yet: 

  • Between now and 2030, gas sales to Israel's domestic market are projected to grow at eight times the speed of world gas demand: 11.6% p.a. compared to 1.6% p.a.
  • Israel now has so much gas, it might even build a gas pipeline to supply some Southern EU markets.
  • Israel has created its own Sovereign Wealth Fund to save some of the royalties received from exploiting its hydrocarbon resources, joining an exclusive club of countries such as Norway and Qatar.

Because statistics are fun, here are a few general macro-economic stats about the country that you also probably haven't seen elsewhere yet: 

  • Based on the average of the last 20 years, Israel's economy has grown at a faster rate than any other significant country of the developed world. During this period, its population increased by 50%, but its economy grew by 140%. Israel's gross domestic product per capita has now surpassed that of Britain, Japan, and France.
  • It is also the country with the youngest population in the OECD. The country's median age is 30, compared to 40 across the OECD. The median age in the US is 38, in the UK it is 40, and Germany comes in at 47!
  • Israel has more companies listed on the Nasdaq Stock Market than any other country except the US itself and China.

Not surprisingly, an increasing number of investors is waking up to the fact that there is money to be made off Israel's success.

For a concrete example, look no further than Energean Energy (UK:ENOG), the company that deserves to be called the first London-listed energy play on the Israeli gas sector.

This "outsider" would have doubled your money over the last 12 months

In 2015, Energean Energy picked up the rights to gas fields that are located off the coast of Israel. An Israeli energy company was legally obliged to sell them because it had grown to too large a market share in its industry and faced anti-trust regulation.

The executives of Energean Energy spotted an opportunity, though not that the broad market would have seen it as one at the time. When news about the transaction emerged, many observers were sceptical. 

  • Israel was (and remains) a political red button subject in the eyes of many, whether borne out of ignorance or not.
  • The company required over a billion dollars in financing for the facilities needed to actually produce gas.
  • There was no established investor community following the fledgling gas industry of Israel, i.e., few even paid attention to the news.

Fast forward to today, and a lot has changed: 

  • Energean successfully mobilised $1.7bn in financing to get the fields to production.
  • The entire reserves of the two fields have been sold under long-term contracts.
  • The company is now already looking at the next growth opportunities in the region. As part of that, it is investigating potentially buying a 45% stake off the coast of the Gaza Strip.

During the last few weeks, in particular, Energean shares rallied. News about the company carrying out further drilling in Israel created a lot of excitement. Compared to where the share price was a year ago, it has now doubled.

Which begs the question, how best to make money off the Israeli gas opportunity during the next 12 months?

Fear not, I may have the answer for you.

Guess which company I am?

If I were to run a stock market-related pub quiz, I'd have people guess the name of the company that fits the following attributes: 

  • One of Israel's richest men – a self-made billionaire who has a 40-year track record in buying and selling undervalued assets – is the majority shareholder.
  • The share price is 45% off its peak.
  • The company is using the current depressed share price to buy back shares in the open market.
  • The major shareholder recently bought more shares in the open market.
  • Based on last year's dividend, the stock yielded 6% p.a.
  • Future dividend hikes are quite likely, and there is even the possibility of special dividends getting paid out as a one-off bonus for shareholders.
  • With a $2bn market cap, it's a reasonably liquid stock to trade.
  • The company's shares can already be bought as OTC-ADRs on American and European stock exchanges.
  • A full-fledged dual listing of the shares in London is a declared goal of the company's CEO, as he confirmed in a 1 April 2019 conference call with your author.

So, which company is that?

For once, I'll be naughty and leave it with teasing you. This investment opportunity is so exciting – in my personal view – that I am leaving it exclusive to the Members of my website. A few days ago, I published a 104-page report on this opportunity.

The report is an almost forensic overview of the changes this billionaire investor has implemented at this particular publicly listed company over the past ten years. He has taken his time because this company could turn out to be the most important investment of his life, possibly earning him billions. He is sometimes called "Israel's Warren Buffett", but unlike the media-savvy sage of Omaha, he is extremely secretive. However, as I explain in this report, 2019 is the year when this decade-long effort will start to become apparent to the public. Imagine a company going from having an outdated investor relations website, to going on a global roadshow to meet institutional investors.

Also, my report takes you on a pretty wild ride through the emerging Israeli gas industry. This is an industry that has started to transform the fate of Israel, and which could even significantly reshape politics in parts of the region. E.g., would you know which organisation just became the first ever Arab-dominated organisation to invite Israel to become a member? For anyone interested in what's going in the world, these are quite exciting (and often surprising) developments to watch from afar. I have woven all of the different strands of this story together to a document that I hope makes for interesting background reading (although there is also an Executive Summary if you are pressed for time).

Last but not least, the report also contains a fun list "130 things I learned while traveling in Israel", which is a collection of notes I wrote up after my research trip. If anything, it should give you a different perspective of Israel and the region!

The Membership required to download this document is just $49 per year.

I had colleagues from the investment publishing industry call me up and ask me if this was a typo: "Surely, this is per month, not per year?!"

It wasn't a typo. I have decided to shake up the investment writing industry a bit.

Since I want to help a new generation of would-be investors into the saddle, I have priced my package of ten reports per year to be just a fraction of what you would have to pay elsewhere for this sort of market intelligence. You can learn more about it on my website, and getting access to this report won't cost you more than a few minutes of your time. You'll also get access to all the previous reports.

You'll learn about at least ten "super stocks" per year

To the best of my knowledge, no other investment service has dissected the Israeli gas opportunity and this particular company in such detail yet.

Which is what is all about: 

  • Finding opportunities where others aren't looking (yet).
  • Providing my readers with all the background information they need to judge for themselves.
  • Having a bit of fun along the way and learning about what's going on in the world.

As the example of Energean Energy shows, good money is made in areas that hardly anyone has on their radar screen. These shares can be bought and sold by anyone who has a brokerage account with access to major markets such as New York, London, or Frankfurt. Monitoring these investments is easy, e.g., I am providing updates, and there are plenty of other resources on the web.

The Weekly Dispatches that you are a reader of are the place where I present you cases that are of general interest, or that make for great case studies.

On the other hand, the ten research reports I publish each year are what you could call the "super stocks" that I discover along the way. The kind of investments that are worth looking into in great detail, because they are probably worth holding for some years and could go up in value by a multiple.

The number of Members of this website is growing, and reader feedback for the past reports has been great. E.g., one of the previous stories just got me featured in an investment magazine in Germany.

It'd be great if you were to join us, and I am available for any questions you may have.

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