Oakmark Funds, a chicago-based unit of Harris Associates that oversees $15 billion in assets, calls value investing its cornerstone. With the Nasdaq down 70% from its March 2000 high, the technology sector has drawn Oakmark's attention. On its shopping list: Israeli stocks carried on U.S. exchanges.
Why look for a stock pick from a place like the Middle East? Robert Taylor, an investment analyst with Oakmark's $1.5 billion (assets) International Fund, points to as good a reason as any: low taxes. Under Israel's "approved enterprise" program, Israeli firms spending certain amounts of money locally on research and capital expenditures get their tax bill chopped by up to two-thirds.
Its favorable tax environment helps explain why Israel, a country with a population of just 6.4 million, attracted more venture funding ($3.3 billion) last year than Italy ($2.7 billion), Korea ($1.6 billion)and Taiwan ($1.1 billion), according to PricewaterhouseCoopers.
The tax rate of Check Point Software Technologies, a maker of encryption software for computer networks, is just one example. In its latest fiscal year, ended last December, Check Point's effective tax rate was 15.6%, up slightly from 14.4% in 2000, but still well under the standard Israeli tax rate of 36%.
Christopher D. Alderson, head of emerging-market equities with T. Rowe Price, likes Check Point's 95% gross margins and $500 million in cash and equivalents. "That's pretty extraordinary for a company that's only been going seven years," he says.
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